Welcome to the website of the law office of Steven D. Rubin.  Mr. Rubin is licensed to practice law in the State of Florida and his office  is located at 200 West Palmetto Park Road, Suite 301, Boca Raton, Florida 33432. He is admitted to practice before all of the State Courts in Florida, as well as various federal courts, including the United States Supreme Court, and is a Florida Bar Board Certified Real Estate Attorney.

FLORIDA IS REAFFIRMED AS THE PLACE TO GO FOR DEBTOR PROTECTION

The Florida Constitution exempts every Florida resident’s homestead from “forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon”, except for “the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field, or other labor performed on the realty.” See Art. X, Section 4, Florida Constitution. In general, a “homestead” is the Florida resident’s permanent home, and land surrounding the home, provided the total area is not more than a half acre if the home is located within a municipality, and not more than 10 acres if the home is located in an unincorporated area. There is no monetary limit for the value of the homestead exemption. For example, pursuant to this Constitutional homestead protection, if a homeowner negligently injures another person and that person obtains a $5,000 judgment  against the homeowner, the injured person cannot collect the $5,000 personal injury judgment against the homeowner by forcing the sale of the homeowner’s homestead real property, even if the homestead has a value in excess of $5,000,000.

What if the homeowner sells the homestead residence after the injured person obtains the judgment against the homeowner? Can the injured person collect the judgment from the sale proceeds of the homestead because under those circumstances, the homestead is not sold “forcibly” by the Sheriff, but instead voluntarily by the homeowner? In 1962, the Florida Supreme Court answered this question and ruled that the sale proceeds from the homeowner’s voluntary sale of the homestead are still protected from the creditor’s attempt to collect its judgment, provided:
“1. There must be a good faith intention, prior to and at the same time of the sale, to reinvest the proceeds in another homestead within a reasonable time;
2. The funds must not be commingled with other monies; and
3. The proceeds must be kept separate and apart and held for the sole purpose of acquiring another home [homestead].” See Orange Brevard Plumbing & Heating Co. v. La Croix, 137 So. 2d 201 (Fla. 1962).

As a practical matter, how does the homeowner keep the sale proceeds “separate and apart” and for the “sole purpose” of acquiring another homestead? Typically, when the sale of a home occurs, the seller is paid at the closing either by attorney’s trust account check or wire transfer. How does the homeowner have to “keep” the proceeds – put the check in a folder labeled “for new homestead only”; wire or deposit the funds into a separate non-interest bearing bank account; or cash the check and put the money in a jar under the bed until it is used to purchase the new homestead (an example used by the Florida Supreme Court)? Prior case law established that placing the proceeds into a separate interest bearing bank account was sufficient. That sounds reasonable, even though the proceeds are technically “invested” in the bank, as opposed to a new homestead, and the homeowner receives a return on his bank investment (the interest). It has also been held that the homeowner/seller can take back a note and mortgage instead of cash when the homestead is sold, and the note and mortgage will qualify for the homestead exemption, provided they are eventually used to reinvest in the new homestead.

What if the sale proceeds are placed into a separate brokerage account labeled “homestead account”, and the funds are used in the interim to purchase mutual funds and unit investment trusts? Are those “investments” for the “sole purpose” of buying a new homestead? Yes they are, says the Florida Supreme Court. In JBK Associates, Inc. v. Sill Bros., Inc. (41 Fla.L.Weekly S189 (Fla.04/28/16), the Court held that such investments were “safe”and an alternative to today’s bank accounts which do not “garner any significant amount of interest earnings”, and they do not “demonstrate an intent so different from reinvestment in a new homestead within a reasonable time.” In JBK Associates, the debtor did in fact reinvest the proceeds into a new homestead within a reasonable time after the sale which prevented the judgment creditor from collecting its judgment.

Unanswered questions remain for future resolution, and they will be decided on a case by case basis. For example, how long is a “reasonable time” from the date of sale of the homestead to reinvesting the sale proceeds into a new homestead? One court has stated ten years is too long, and although the opinion in JBK Associates does not state the precise amount of time that had elapsed, it was at least four months. Are the profits generated by the homeowner from the interim stock and mutual fund investments also protected from forced sale? What constitutes a “safe” investment, and does a “safe” investment vary depending upon the interest that can be generated by depositing the sale proceeds into a federally insured bank account? One question was definitely answered unequivocally: Florida Courts will continue to construe the homestead exemption very liberally in favor of homeowners, which makes Florida a very friendly and welcoming destination for the Nation’s debtors.