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Homestead Exemption Update

Patrick W. Ryskamp and William G. Schlotthauer

Each one of you already knows that when homestead property is transferred to a third party, the homestead cap is lost and the property appraiser will reappraise the property the next tax year for the purpose of assessing taxes.  What happens to the homestead cap if a Grantor transfers property to himself/herself and others jointly?

Effective July 1, 2006, Section 193.155, Florida Statutes, now clarifies that a transfer of property in which the homestead owner is listed as both grantor and one of multiple grantees of the real property, the transaction will not be considered a change in ownership for homestead exemption purposes.  You would typically see this type of transfer between family members.  CAVEAT:  If an additional grantee applies for the homestead exemption together with the original grantor, the property will lose the homestead cap and there will be a reassessment for tax purposes. 

The practice tip is to be cognizant of non-sale related transfers of property between family members or others as it could result in the loss of the homestead cap. Furthermore, when such a transfer occurs, make sure that the person applying for homestead remains the same after a property transfer and no new additional grantees make an application for homestead.

While I’m on the subject of homestead, something I see every year with closings between January 1st and March or April, is a Seller with homestead status in the prior year withdraws homestead status with the property appraiser for the next year. Sellers do this when they receive the update card from the property appraiser’s office and decide that since they are moving, homestead is no longer needed.  As a result, taxes could increase significantly for the year of closing with the Buyer shouldering the majority of the burden.  Remember, homestead is determined by the status of the property on January 1st regardless of whether there is a property transfer later in the year; thus a property with homestead exemption on January 1stwould maintain the homestead cap even though a sale occurred on January 2nd.  

The practice tip is if you represent a Buyer and the closing is between January 1stand the months of March and April, and the Seller currently has homestead status on the property, add a covenant in the contract that states the Seller will not change the homestead status of the property prior to closing.  This strategy does not negatively affect a Seller unless the Seller owned a different property on January 1st and intended this other property to be homestead for the year of closing.
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