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Property II > Homestead > Flashcards

Homestead Flashcards

1
Q

Goals of Homestead Laws

A

Goals of Homestead Laws

  • Protect the family from misfortune of the head of the family (preserves family unit)
  • Protect the head of the family/debtor himself
  • To benefit the public as a whole – alternative to crime or flight of a person helplessly in debt
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2
Q

TX Homestead Laws apply to ______________.

Homestead laws originate from _____________.

A

TX Homestead Laws apply to land and improvements thereon.

The law originates from the state constitution and statute.

If a residence qualifies as a homestead, it is protected from forced sale for payment of debts (though certain liens may validly attach)

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3
Q

In order to qualify as a homestead, a residence must

A

In order to qualify as a homestead, a residence must

  • rest on the land and have a requisite degree of physical permanency, immobility and attachment to a fixed realty.
    • A boat/yacht will not qualify as a homestead – retains its mobile nature
    • A mobile home might qualify as a homestead, especially if the wheels are removed and it is sufficiently attached to the land
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4
Q

A person/family can only claim _______ homestead.

A

A single adult/family can only have one homestead.

If the person has multiple properties, the homestead is determined with reference to objective facts (such as where the person is living, where he is registered to vote, what state is his driver’s license, etc.). The owner can’t just pick what qualifies as homestead.

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5
Q

Considerations to determine if this land deserve special homestead protection?

A

Does this land deserve special homestead protection?

Consider:

  • The point in time when the homestead character arose
  • Use and occupancy
  • Single or family
  • Urban (10 acres)/Rural (100 acres single/200 acres family)
  • Present possessory interest in land –> fee ownership of the land itself is not required
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6
Q

Designating a homestead

A

A formal designation of homestead status is not required
A person may voluntarily designate property as homestead:

  • Filed in the county deed records. Must contain:
    • Sufficient property description
    • Statement the property is the person’s homestead
    • Name of current record title holder of the property
    • For rural homestead à number of acres and if more than one survey, the number of acres in each survey
  • The voluntarily designation doesn’t automatically make property into a homestead and it is not binding on a court. Homestead status must be supported by specific facts and circumstances.
  • A voluntary designation can be changed, but Fuse thinks that it can only be changed if the changer has legal title
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7
Q

Rural Homestead

A

Rural homestead (not in a city or town)

  • 100 acres for single adult / 200 acres for family
  • Acreage may be in one or more parcels of land
  • Must reside on at least part of the land
  • If non-contiguous, the additional parcels must be used in support of the family/single adult
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8
Q

Urban Homestead

A

Urban homestead (in a city, town or village)

  • 10 acres (family or single)
  • 1 or more contiguous lots (can’t be disconnected)
  • Home or both home & business
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9
Q

If someone owns more than the allowable amount of acreage or land, then?

A

If somebody owns more property than they are entitled to under homestead law, case law in TX supports allowing the individual to pick and choose which acres will receive homestead protection

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10
Q

TX Property Code defines urban homestead as:

A

At the time of designation [when the issue is in dispute], the property must be

  1. located within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision AND
  2. Served[1] by police protection, paid or volunteer fire protection, and at least three of the following services provided by a municipality or under contract to the municipality:
  • Electric
  • Natural gas
  • Sewer
  • Storm sewer
  • Water

Anything that isn’t urban is RURAL

[1] Satisfied as long as services are available

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11
Q

How is “family” defined for homestead purposes?

A

Only matters for rural property

The requirement of a family is met whenever there is

  • a group of people who have a social status as a family (a group living together subject to one domestic government).
  • There must a legal or moral obligation upon the head of the family to care for the rest of the members of the family, and a corresponding dependence of the others upon the head of the family.
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12
Q

“Family” examples

  1. A father and minor children = _____________
  2. An adult child and a disabled parent = _____________
  3. Grown children living with parents = _____________
A
  1. An adult child and a disabled parent = family because the adult child has a moral obligation to support the parent
  2. Grown children living with parents ≠ family as long as the grown children can support themselves
  3. A father and minor children = family because the father has a legal and moral obligation to support the children, even if he doesn’t have custody
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13
Q

Rules for Homestead

A
  • Can only have ONE homestead –> If someone has urban and rural property, can only have one as homestead, even if all of the property is used in support of the family
  • Mere intent to occupy property as a homestead does not establish homestead protection. Must actually occupy property as a home before it can receive homestead protection
  • Intent to use unimproved land + overt acts establishes homestead protection
  • Limited use + intent to use land for homestead at some time in the future is not enough to establish homestead protection
  • A voluntary designation of homestead is not binding. The court will look at objective facts and circumstances to determine homestead protection.
  • The person claiming homestead protection must have some present possessory interest in the land. A future interest is not enough.
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14
Q

Marriage & Homestead

A
  • Through marriage, a spouse establishes an interest in their home, even if it was the other spouse’s separate property before the marriage

​

  • Also, the surviving spouse is entitled to the same homestead as deceased possessed before his/her death (if rural property)
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15
Q

Homestead:

**Life estate by divorce **

A

Life estate by divorce –> court can create a life estate in one spouse as a consequence of the other spouse’s wrongful acts

Homestead is now occupied by the good spouse – bad spouse has a future interest (reversion)

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16
Q

Legal Implications of Homestead Status during life:

DEBT PROTECTION

A

Debt Protection: homestead protection prevents all liens from validly attaching to the property except for those specifically provided for in the constitution (magic 8)[2]

  • Purchase money lien
  • Tax liens
  • Owelty of partition
  • Refinance of an otherwise permissible lien
  • Mechanic’s lien (“home improvement lien”)
  • Home equity loan or line or credit
  • Reverse mortgage
  • Refinance of personal property lien on manufactured home[3]

[2] Court has noted that a Home Owner’s Association lien is permissible because it is on the property at the time of purchase (but balance is $0)

[3] Situation where this would come up: mobile home being attached to the land

17
Q

Legal Implications of Homestead during life:

JOINDER REQUIREMENTS

A

Joinder requirements

  • Cannot sell or abandon homestead property without the consent of each owner and the spouse of each owner (If separate property that is not homestead, owner can do whatever they want (even if they have a spouse)
  • Limited exceptions
    • Spouse is judicially declared incapacitated
    • Unusual circumstances
18
Q

Legal Implications of homestead status during life:

TAX BENEFITS

A

Tax benefits

  • Entitled to a minimum of $15,000 off of taxed value of property for school taxes; some areas get up to 20% discount
  • May receive a $3,000 tax exemption on some county taxes
  • Those who are age 65 and older or disabled get additional tax exemptions
  • Cap on how fast taxes can increase
19
Q

Unconditional liens

A

Unconditional liens (no special requirements other than joinder)

  • Purchase money lien (regular lending requirements + joinder)
  • Federal tax liens and property taxes (no joinder)
  • Owelty of partition (no joinder)
  • Refinance of an otherwise permissible lien (joinder)
  • Refinance of personal property lien on manufactured home
20
Q

Conditional Liens

A

Conditional liens (may validly attach only if all conditions set forth in the constitution are satisfied.

If not satisfied –> no valid lien!)

  • Mechanic’s lien
  • Home equity or line of credit
  • Reverse mortgage
21
Q

Mechanic’s Lien

A

New improvements –> requires a written contract between contractor/builder and property owner + joinder requirement

Repair or renovate existing improvements –>

  1. written contract +
  2. joinder requirement +
  3. 5 day waiting period from application for credit to signing the contract (unless the condition materially affects the health and safety) +
  4. 3 day recission period after signing the contract +
  5. signed at the proper location (not at the contractor’s office – must be at office of a third party lender, attorney, or title company)

All conditions must be satisfied before work begins!

22
Q

Home Equity Loan

A

Equity = the difference between the fair market value of the property and the debt secured by the property

  • Home’s FMV = $150k
  • Outstanding debt = $90k
  • Equity = $60k

80% Rule: the total amount of all debt attached to the property cannot exceed 80% of the FMV of the home

  • This protects the homeowner and the second in time lender
23
Q

Home Equity Loan:

CONSTITUTIONAL REQUIREMENTS

A

Constitutional requirements:

  • Non-recourse loan: no personal liability for the loan; the homestead property is the only asset potentially taken if loan not satisfied unless the property owner obtained credit through actual fraud
  • Not an open end account: cannot be debited periodically like a credit card unless it is a home equity line of credit (but even then money cannot be obtained by using a credit/debit card or pre-printed checks unsolicited by the property owner)
  • No pre-payment penalty
  • Closing location: can only close the loan at the office of the lender; lawyer or title company
  • If home equity lender forecloses –> must use a judicial foreclosure
  • Can only have one home equity loan at a time
24
Q

Reverse Mortgage

A

Applies to individuals 62 or older

Provides installment payments OR one lump sum payment to the property owner and no payments must be made to the lender until:

  1. All borrowers have died OR
  2. The homestead property securing the loan is sold or transferred OR
  3. All borrowers cease occupying the property for more than 12 consecutive months without prior approval from lender OR
  4. The borrower defaults in some manner (not keeping the property in good repair)
  5. Non-recourse loan: no personal liability for the loan
  6. Requires judicial foreclosure
25
Q

Homestead Proections at Death

A
  1. Debt protection
  2. Life estate by operation of law/right of occupancy
  3. Exemption from partition
26
Q

At owner’s death

Debt protection

A

Minor children and surviving spouse are protected against all debts other than those that are constitutionally permissible

27
Q

At owner’s death

Life estate by operation of law/right of occupancy

A

Life estate by operation of law/right of occupancy

  • Surviving spouse has automatic right of occupancy. The surviving spouse gets a life estate determinable
    • Rule of waste and open mines doctrine apply
    • The surviving spouse must continue using the homestead as a homestead. If she remarries and moves to a new homestead, she can lose her interest in the property! This right is non-transferrable.
  • Minor child must petition the court for right of occupancy, which will usually be granted until the child turns a certain age, or some other condition. This right is non-transferrable.
28
Q

At owner’s death

Exemption from partition

A

Exemption from partition: the homestead is not to be partitioned among the heirs of the deceased during the lifetime of the surviving spouse or during the minor child’s right of occupancy

29
Q

Proceeds from sale of homestead

A
  • Proceeds from the sale of a homestead are protected for up to 6 months as the person seeks a new homestead
  • This money is to be used for the purchase of a new homestead. If the homestead owner uses the money for any other purpose, the protection is lifted!
30
Q

Terminating the homestead

A

Once property becomes “homestead” that status continues until abandoned

Abandonment = cease to use the property + intent not to use it again as a homestead

  • The party claiming abandonment must plead it and carry the burden of proving it
31
Q

Situations that amount to abandonment of Homestead

A

Situations that amount to abandonment

  • Homestead is sold
  • Death of the homestead claimant without a surviving spouse or minor children
  • Primary residence at another property
  • Renting of the homestead (other than temporary)
32
Q

Temporary Rental for Homestead purposes

A

Temporary Rental

  • Rented for up to 5 years due to claimant’s ill health and had intent to return
  • Rented during periods of travel
  • Rented while temporarily relocated for a job
  • Rented while staying with an ill family member who needs care
33
Q

Non-Temporary Rental for Homestead purposes

A
  • Rented so claimant has money to live elsewhere
  • Rented to obtain revenue to support family
  • Lease of 8 years with issue having option to renew
  • Lease of 10 years with option to purchase
34
Q

Effect of Abandonment

on Homestead

A

Effect of Abandonment

  • Allows for a new homestead to be established elsewhere
  • Allows the property to now be subject to all creditors
  • Joinder requirement is extinguished
  • Would no longer be subject to division in divorce proceedings if separate property
  • At death would pass through will or intestate succession and subject to all debts and partition by new owners

Property II (7 decks)

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