Somebody Moved My HomesteadSomewhere in the conference room of a real estate attorney ". . . and at no cost to you, my office has prepared a declaration of homestead.”"Oh, how nice. What's a homestead?"
Chapter 188 Section 1 of the Massachusetts General Laws provides homeowners (including owners of mobilehomes) with the right to declare their residence as their homestead by recording a document called a “Declaration of Homestead”, with their county registry of deeds in order to protect their principal residence against subsequent attachment, levy on execution or sale to satisfy debts to the extent of $500,000.00 per residence, per family. This declaration of homestead is readily provided to purchasers of real estate at the time of closing, by their real estate attorneys and is also available at most registries of deeds in the Commonwealth of Massachusetts.
While the declaration of homestead offers great protection to homeowners, recently the bankruptcy court has seriously diminished the value of previously recorded homesteads for many homeowners through its interpretation of that portion of the homestead statute, which describes how a declaration of homestead is terminated. The statute provides the following methods for the termination of a homestead:"Chapter 188: Section 7 Termination of estate of homesteadSection 7. An estate of homestead created under section two may be terminated during the lifetime of the owner by either of the following methods:--(1) a deed conveying the property in which an estate of homestead exists, signed by the owner and the owner's spouse, if any, which does not specifically reserve said estate of homestead; or by (2) a release of the estate of homestead, duly signed, sealed and acknowledged by the owner and the owner's spouse, if any, and recorded in the registry of deeds for the county or district in which the property is located."At issue is the first method of homestead termination, which describes a “deed conveyance” The bankruptcy court carefully reviewed what constitutes a deed conveyance in the following cases, and the outcome surprised many conveyancing attorneys:
In Re Hildebrandt, 313 B.R. 535, (2004). The issue was whether a deed of real property from a debtor and co-owner to the debtor as sole owner, without reserving rights of homestead from a previously recorded declaration of homestead on the property, terminated the estate of homestead. Here, the court held that absent a specific reservation of rights in a previously recorded declaration of homestead, a deed, even to one's self, constitutes a "transfer" or conveyance and therefore terminates the homestead.
In Re Desroches, 314 B.R. 19, (2004). The issue was whether a homestead exemption under Massachusetts General Laws ch. 188, § 1 is subordinated to a subsequently recorded mortgage absent express words of subordination or release in the mortgage. In this case a mortgage was held to constitute a deed conveying the property. Much like in In Re Hildebrandt, sited above, the homestead protection was denied the debtor because the mortgage was recorded after an earlier recorded homestead declaration and the debtor did not specifically reserve the debtor's homestead rights.
What these two cases mean for the average homeowner is that if a homeowner previously recorded a declaration of homestead and then transferred the property by adding or subtracting a spouse or other owner to their deed or if a homeowner subsequently refinanced their mortgage, obtained a second mortgage or an equity line, chances are that homeowner terminated their homestead and needs to record another one.
What should I do? If you are planning on deeding your property or mortgaging your property, ask your real estate attorney to reserve your rights in your previously recorded homestead in order to avoid its unwanted termination. If you are unsure if your current homestead is still good, contact your real estate attorney and ask that they review the status of your homestead to put your mind at ease.
Attorney Nyles L. Courchesne is a partner with the Law Office of Peskin, Courchesne & Allen, P.C., specializing in residential and commercial real estate.
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