This article agrees with the result in that case, even though the reasoning the court used to
reach the correct result was erroneous. As applied to the decision of a trial court, that is referred
to as the “tipsy coachman” doctrine.2 This case, with its erroneous reasoning, provides an
excellent real-life scenario against which to dissect the underlying constitutional, statutory and
common law principles applicable to homesteads and leaseholds, leading, hopefully, to a better
understanding of the subject in general
This analysis begins with the black-letter law that “homestead property must consist of an
interest in realty”3 (In re Estate of Wartels, 357 So.2d 708, 710 (Fla.1978); State of Florida,
Department of Revenue v. Swinscoe, 376 So.2d 1, 2-3 (Fla. 1979)) and asks the question “if a
person occupies a residence as a tenant under a leasehold, and meets all the other legal
requirements, is that interest sufficient to support the benefits and limitations of article X, section
4 constitutional homestead?” The answer is “sometimes yes and sometimes no” (or in the
ordinary legal obfuscation, “it depends.”) It would be useful if you know which of those
alternatives applies to your client’s real-life situation, and why.
In general, three kinds of residential potentially-homestead property might involve a
leasehold; those are a traditional home, a condominium unit and a cooperative unit. We will
examine each type to determine whether it is qualified for the constitutional exemption from
claims, burdened by the constitutional limitation on devise, or both.
2
Defining the issue.
By far, the most common type of potential-homestead leasehold interest is the
cooperative unit, because, in every instance, the owner’s right to occupy flows wholly or in
substantial part from a lease given to the tenant by the land-owning entity.4 Owners of
cooperative units in Florida generally own a membership [a chattel]in a land-owning entity,
typically a not-for-profit corporation,5 and possess and occupy the unit under a lease [a chattel
real] from that entity.6 The Cooperative Act, § 719.103(26) Fla.Stat. defines “Unit owner” or
“owner of a unit” to mean the person holding a share in the cooperative association and a lease or
other muniment of title or possession of a unit that is granted by the association as the owner of
the cooperative property. In contrast, the Condominium Act, § 718.103(28) Fla.Stat defines
“Unit owner” or “owner of a unit” as a record owner of legal title to a condominium parcel.
If it is true that homestead must be owned (but not necessarily in fee simple), does that
requirement disqualify a cooperative apartment from the protections and limitations of art. X, §
4? The same question must be asked whether a condominium or a private home, built on a
leasehold, can be article X, § 4 homestead – and the answers in one or more instances may be
different!
Is art. X, § 4 homestead on leased land a decided or undecided (or partially decided) issue
in Florida? That is what this article will examine.
This article begins with a discussion of Geraci, and then discusses Wartels, Southern
Walls v. Stillwell, 810 So.2d 566 (Fla. 5th DCA 2002) and Phillips v. Hirshon, 958 So.2d 425
(Fla. 3d DCA 2007), review dismissed, Levine v. Hirshon, 980 So.2d 1053 (Fla. 2008) to try to
resolve the issues of leasehold homesteads, or at least define these parameters.
The statutory homestead exemption for leasehold property.
In addition to the art. X, § 4(a) exemption from levy and sale for homestead, there is also
a parallel statute specifically providing an identical homestead exemption to shelter a mobile or
modular home or dwelling house (and in one case, a houseboat) used as a residence, on land not
belonging to the homesteader, from creditor’s claims. § 222.05 Fla.Stat. From as far back as
3
1869 the Florida legislature “[a]pparently recognizing that a homestead on land that was leased
did not qualify for the constitutional homestead exemption for a homestead on land that was
owned, . . . provided that ‘a person owning and occupying any dwelling house on land not his
own, which he may possess rightfully by lease or otherwise, and claiming such house as his
homestead, is entitled to the exemption of the house from levy and sale.’”
That provision became F.S. § 222.05 Fla.Stat. The court in In re Lisowski, 395 B.R. 771,
779 (Bankr.M.D.Fla., 2008) observed:
As described above, the homestead exemption provided by Article X, Section 4(a)(1) of the Florida Constitution applies to improved land or real property owned by a debtor, provided the debtor's residence is situated on the land. Section 222.05 of the Florida Statutes, on the other hand, expressly applies to persons who do not own the land upon which their mobile home is situated.
Since the Constitutional exemption requires land ownership, and the statutory exemption specifically excludes land ownership, the Court finds that the statute does not simply "implement" the Constitutional exemption. On the contrary, the Court finds that the homestead exemption provided by the Florida Constitution is separate and distinct from the exemption provided by § 222.05 of the Florida Statutes.
In order to properly analyze the reported cases discussing these very similar and very
confusing concepts, it is important to determine whether it is the statute or the constitutional
provision, that is being applied to reach a result, especially when the statute explicitly includes a
homestead on leased land, but the constitutional exemption does not and the statute provides no
post-death exemption, but the constitutional provision does.
The Geraci facts:
Ms. Geraci died owning, and permanently residing in, a condominium built on a 100 year
land lease which, at the time of her death, had an unexpired term of approximately 75 years. Her
estate was insolvent and creditors filing claims included the Agency for Health Care
Administration (Medicaid recovery) and Pinellas County Emergency Medical Services
Authority. The personal representative petitioned the court to determine the condominium was
exempt from creditor’s claims under art. X, § 4(a) of the Florida Constitution. The trial court
held that the condominium did not qualify for that exempt status since the owner did not own an
4
interest in land, a leasehold not being an interest in the land for purposes of art. X, § 4. The
matter was appealed and the Second District Court of Appeal reversed.
The Second District Court of Appeal, stated the issue as “whether a condominium that is
subject to a long-term leasehold may qualify as a homestead [under art. X, § 4(a)(1) and (b),
Fla.Const.] to be protected from forced sale to pay the creditors of the deceased owner.” In a
unanimous opinion the court reversed the trial court and answered the issue in the affirmative.
The common law and the case law.
Within the context of the over-riding requirement for article X homestead status
pronounced in Wartels, that “homestead property must consist of an interest in realty” we should
examine whether a leasehold, generally, is “an interest in realty.” In that context, does it make a
difference whether the lease is month to month, or 100 years, and if it does, what is the “cutoff”
period when a leasehold becomes an “interest in realty?” Do the obligations of the landlord and
the tenant under the lease such as responsibility for major repairs and payment of insurance or
taxes make a difference?
At common law (which applies pursuant to F.S. § 2.01 unless changed by statute
applicable to the particular matter), a lease, even one for a long term, is not an interest in real
property; rather it is a chattel, generally known as a chattel real because of its relationship to the
land.
As is said in 17 Cyc. 953: ‘At common law a leasehold interest in lands, no matter for what term of years, was a chattel, and in the absence of a statute to the contrary may be levied upon and sold as personal property.’ Also see authorities there cited, as well as text and authorities cited on page 954. We have no statute in this state changing the common-law rule in this respect, and we have no doubt that, if Tischler's interest in the lot was a leasehold interest only, it was subject to sale under an execution.
It has been long recognized in this state that, at common law, a leasehold interest was considered as a chattel real, that is, a species of personal property, and, in the absence of a statute changing the common law rule, the leasehold was to be classified as personalty, not realty. (Citations omitted.) It is also clear that the common law shall have continuing force and effect where the Legislature has not acted to change it. See § 2.01, Fla.Stat. (1983).
5
Despite Aurora's compelling argument that a lessee's interest in a long-term lease is for practical purposes substantially the same as the fee simple ownership of the real property, see C.J. Moynihan, Introduction to the Law of Real Property 63 (1962), we have not been directed to, and have not found, any Florida statute relating to ad valorem taxation which can be fairly read to classify leases of privately owned property as real property. Indeed, the statutory definition of “real property” for purposes of ad valorem taxation “land, building, fixtures and all other improvements to land,” § 192.001(12), Fla.Stat. (1983), cuts against Aurora's contention that “real property” means, as well, a “leasehold interest in real property.” (Footnotes omitted.)
Aurora Group, Ltd. v. Department of Revenue, 487 So.2d 1132, 1133-1134 (Fla. 3d DCA
1986).
Prior to January 1, 1968, the attorney general issued several opinions about eligibility of a
tenant under a long term lease for the homestead tax exemption (which also requires that the
homesteader’s interest must be an interest in land), now found in art. VIII of the Florida
Constitution. These opinions are digested in Op.Atty.Gen., 066-38, April 14, 1966 and they
consistently deny that exemption to persons occupying land under a lease, however long, on the
grounds that a leasehold is an insufficient interest in land to support the homestead tax
exemption. For example, OAG 053-335, p.312 of the 1953-54 biennial report of the attorney
general said
Except where modified by statute (and we know of no such statute in this state) leases for terms of years, however long, are chattels real falling within the classification of personal property (51 C. J. S. 531, §26; 32 Am. Jur. 39, §16). In this connection see also 51 C. J. S. 763, §37; 61 C. J. 210, §184; 2 Cooley on Taxation, 4th Ed., 1268, §593. Being personal property and not real property, a long term lease for a given number of years cannot be made the basis for homestead tax exemption under said §7, Art. X, of the State Constitution. (Emphasis supplied.)
The Florida Supreme Court in 1978 in Wartels, supra, decided that a cooperative unit
could not be art. X, § 4 homestead for the reason that “. . . the purchaser of a cooperative
apartment unit does not hold any type of proprietary interest in either the apartment itself or the
apartment building containing the apartment unit, or the land upon which the building is
situated.” At pg. 709. At common law, a similarly limited “bundle of rights” would not rise to
the level of an interest in real estate, and that interest (although not a fee simple interest) is
required to support the article X homestead character of real property. See In re Lisowski, supra.
6
In spite of the holding in Wartels, it is a widely-held belief among lawyers is that a
cooperative apartment may be article X homestead; that a cooperative unit is protected against
creditor’s claims and is devise-limited if the owner is survived by a spouse or minor child. In a
variation on that belief, other lawyers believe a cooperative unit is not devise limited (article X, §
4(c) homestead) but may be exempt from creditor’s claims (art. X, § 4(a) and (b)) in the hands of
the homesteader or his or her heirs. That belief is in accord with (and probably based on) the
holding in Southern Walls supra and mirrors one of the incorrect holdings in Geraci, supra, but
is contrary to the holdings in Phillips, Lisowski and of course, Wartels.
To the extent that the common law is controlling, it seems clear that a leasehold,
regardless of the lease term and provisions, cannot support article X homestead. The next logical
question is, to what extent, if any, has the common law been changed?
Analysis of the law applied to the Geraci facts.
The Geraci court reached the right result (that the condominium built on leased land was
exempt from the decedent’s creditors under art. X, § 4(b), Fla.Const.) but for the wrong reasons
(certainly contributed to by the fact that there was no appearance by appellee in the appellate
proceeding). The two principal holdings of this case, on which the court based its ruling, are
erroneous. These two holdings are:
1. A residence located on leased land, where the lease had an initial term of 100 years
and a remaining term of 75 years, is entitled to homestead protection under art. X, § 4(a) and (b);
for the reason that;
2. The considerations in determining whether a homestead is protected by art. X, §
4(a)(1) and (b) are different from the considerations in determining whether that homestead
property is burdened by the limitations on devise in art. X, § 4(c).
Geraci issue #1. Does a residence on a leasehold satisfy the requirement that the homestead be “owned?”
The Florida Supreme Court in Wartels considered exactly this issue and found a co-
operative apartment was not homestead because, for purposes of art. X, § 4, a co-operative
apartment was not an interest in real property.
7
Neither the Constitution nor the statutes define a homestead for the purpose of devise and descent. The words contained in Article X, Section 4(a)(1) "to the extent of one hundred sixty acres of contiguous land" and the words "if located within a municipality, to the extent of one-half acre of contiguous land" have been repeatedly defined to mean that homestead property must consist of an interest in realty (Citations omitted.)
Wartels, supra at page 709.
Redefining the legal character of a long term leasehold interest from a chattel to an
interest in realty (or treating it as such) is common in documentary stamp tax statutes,8 real
property taxation statutes,9 eminent domain law10 and landlord and tenant actions11 where the
tenant’s rights under the lease have been determined to be sufficiently equivalent to full
ownership during the lease term.
A documentary stamp tax is imposed by § 201.01(1) on the transfer, assignment or
conveyance of “lands, tenements, or other real property, or any interest therein.” Recognizing
that a cooperative interest does not come within the purview of the interests in land covered by
subsection (1), in 1977 the Florida legislature enacted subsection (2) that imposes documentary
stamp tax “upon documents by which the right is granted to a tenant-stockholder to occupy an
apartment in a building owned by a cooperative apartment corporation” and subsection (3)
requiring “tenant-stockholders” to record their documentary evidence of ownership.
A year after the Florida Supreme Court decided Wartels, holding that a cooperative unit
was not an interest in realty, the court had another opportunity to say emphasize, in bold print,
that an interest in a cooperative unit was not an interest in realty, but rather is personal property.
The appellant Department of Revenue contends that stockholders in cooperative apartments hold “an interest in land.” Appellant further contends that section 201.02 has provided for taxation on documents transferring “interest in lands” since 1931 and the adoption of sections 201.02(2) and 201.02(3) merely clarified the predecessor statute and in no way created a new tax on cooperative apartments. . . . We reject the Department of Revenue's contention. This Court, in In re Estate of Wartels, 357 So. 2d 708 ( Fla. 1978), had before it the question of whether a cooperative apartment could be considered homestead property for the purpose of subjecting it to the statutes regulating the descent of homestead property. We distinguished a cooperative apartment ownership from ownership in a condominium and held that “[t]he purchaser of a cooperative apartment unit does not hold any type of proprietary interest in either the apartment itself or the apartment building containing the apartment unit, or the land upon which the building is situated.” 357 So. 2d at 709. We further specifically held that a cooperative apartment was not an interest in land for the
8
purposes of descent and distribution under the homestead laws of this state except for the allowance of a homestead tax exemption as specifically provided in section 196.041, Florida Statutes. (Emphasis supplied)
Other jurisdictions have likewise ruled that stockholders of a cooperative housing corporation do not acquire interest in real property held by the corporation. See Schaffer v. Eighty-One Hundred Jefferson Ave. E. Corp., 267 Mich. 437, 255 N.W. 324 (1934); State Tax Comm'n v. Shor, 84 Misc.2d 161, 378 N.Y.S.2d 222 (Sup.Ct.1975).
The basis for the Department's contention that these cooperative apartments are “interests in land” has no foundation unless we take the illogical position that stock in cooperative apartments is an interest in land for tax collection purposes under the tax collecting statute but is personal property for the purposes of descent and distribution. We reject this reasoning.
Our holding does not mean that the legislature cannot properly tax the holders of cooperative apartment stock prospectively.
State of Florida, Department of Revenue v. Swinscoe, supra. (Emphasis in original; footnote omitted.)
It is universally accepted and agreed, after January 1, 1969,12 that a cooperative unit may
be a tax homestead under article VII, sections 4(d)(1)13 and 6(a)14 so as to limit the increase in
annual assessments on that property for ad valorem taxation purposes to the lesser of 3% of the
assessed value for the prior year or the percentage change in the Consumer Price Index for that
year (Save our Homes) and for the $25,000 real estate tax exemption.15 16 The reason is both
article VII of the Florida Constitution and the related statutes were amended specifically to
provide for this. § 196.041(1) Fla.Stat. was amended to provide specifically the homestead tax
exemption available to long term lessees and owners of a co-operative apartment.
. . . lessees owning the leasehold interest in a bona fide lease having an original term of 98 years or more in a residential parcel or in a condominium parcel as defined in chapter 718, or persons holding leases of 50 years or more, existing prior to June 19, 1973, for the purpose of homestead exemptions from ad valorem taxes and no other purpose, shall be deemed to have legal or beneficial and equitable title to said property. In addition, a tenant-stockholder or member of a cooperative apartment corporation who is entitled solely by reason of ownership of stock or membership in the corporation to occupy for dwelling purposes an apartment in a building owned by the corporation, for the purpose of homestead exemption from ad valorem taxes and for no other purpose, is deemed to have beneficial title in equity to said apartment and a proportionate share of the land on which the building is situated. (Emphasis added.)
The Florida Constitution, art. VII, § 6(a) was amended to provide a specific homestead
tax exemption to owners of a cooperative unit:
9
The real estate may be held by legal or equitable title, by the entireties, jointly, in common, as a condominium, or indirectly by stock ownership or membership representing the owner’s or member’s proprietary interest in a corporation owning a fee or a leasehold initially in excess of ninety-eight years.
No corresponding constitutional or statutory authority exists for leasehold-based
residential units for art. X, § 4 purposes.
The leasehold provisions of article VII leave no doubt that a cooperative unit (as well as a
residence or condominium built on leased land) is qualified for the homestead tax exemption,
thereby overruling the prior case law and attorney general’s opinions based on the common law.
It is disingenuous to argue that because long term-leased property is entitled to a
homestead tax exemption, the art. X, § 4 creditor’s exemption also applies to long term-leased
property. However, that is precisely what is done in Geraci, Southern Walls, McAtee, and Dean.
The practitioner who wants to “get it right” must be very careful to determine which
constitutional article the case is addressing; the one specifically allowing the tax exemption for a
leasehold homestead (article VII) or the one with common law land ownership as a requirement
(article X). This is particularly so because, a court straining to reach a particular result, may be
intentionally vague on that distinction.
It is easy to fall into the emotional trap of the argument, “if a homestead creditor’s
exemption is available for a traditional condominium, why should it not be available for a
cooperative unit?” The 5th DCA used that argument to justify its holding in Southern Walls.
Underlying the policy considerations embodied within the provisions of article X, section 4(a)(1), is the adage that “a man's home is his castle.” Although a castle to one person may be a shanty to another, the law does not so discriminate. Thus, regardless of whether one's castle is a traditional family home or a modest cottage, whether it is a rural farmhouse or a villa by the sea, whether it floats or sits on wheels, whether it is a condominium or a co-op, it should receive the same protection under Florida law.
Southern Walls at page 571.
The reference to “floats or sits on wheels” in this quotation is a reference to § 222.05
Fla.Stat. specifically allowing an exemption for a mobile home on leased land and to the Third
District’s17 allowance of an exemption for a houseboat as a dwelling under that statute. It is clear
that the Southern Walls court knew about 222.05 Fla.Stat., which was clearly applicable to that
10
case and produced the same result the court reached, albeit with much less indirection, and
without ignoring the binding Supreme Court precedent from Wartels. That statute, remarkably,
was never mentioned in the opinion. The Southern Walls opinion is a classic example of a court
blending the law applicable to tax homesteads with the law applicable to creditor’s exemption
homesteads to reach the same result by decision in one type as was provided legislatively in the
other.
The answer is that an article X homestead creditor’s exemption on a leasehold is in
derogation of the common law and is only available if it is specifically granted by art. X, § 4 of
the Florida Constitution (or an applicable statute), and that section does not grant such protection
to leasehold interests, floating homes, or to homes on wheels.
As clear as the law is in relation to taxation of leasehold as homesteads, it is equally
murky as it relates to art. X, § 4 creditors exemption homesteads.
The bankruptcy cases relied on by the Geraci court which held that a creditor’s
exemption homestead may exist on a leasehold residence are In re Dean, 177 B.R. 727, 729
(Bankr. S.D.Fla. 1995) and In re McAtee, 154 B.R. 346, 348 (Bankr.N.D.Fla.1993).18 In Dean
and McAtee, respectively, the homestead involved a co-operative apartment occupied pursuant to
a “Co-Operative Apartment Proprietary Lease” from the cooperative association, and a residence
built on an initial term 99-year leasehold of public lands. Southern Walls relied on Dean as
authority. McAtee relied for authority on F.S. § 196.199(7) which directs that real property
belonging to a governmental agency and leased by it for an original term of 100 years or more,
shall be deemed to be owned by the lessee for purposes of its taxation.19 McAtee also relies on
Williams v. Jones, 326 So.2d 425 (Fla.1975), a case involving assessment of leasehold interests
as real property on leases given by Santa Rosa County to individuals. Cases relying on cases
construing the nature of leased property for purposes of taxation (including homestead
exemption) are distinguishable from the concepts of characterization of residential leaseholds for
purposes of art. X, § 4 homestead. Recharacterization of residential leaseholds by statute for
taxation purposes is insufficient to change the nature of a leasehold at common law, or in the
absence of a specifically applicable statute, or for purposes of art. X, § 4 Fla.Const.
11
However, these cases must yield to the last clear pronouncement by the Florida Supreme
Court in Wartels, supra, (“. . . homestead property must consist of an interest in realty.”) Both
Geraci, and Southern Walls, suffer from this infirmity.
In re Lisowski, supra, provides an extensive historical tracing of constitutional and
statutory homestead that reaches an opposite result from Geraci. The Lisowski court held “[t]he
concept of land ownership was integral to the formation of Florida's homestead exemption.
Further, the concept has been preserved by courts that have interpreted the provision in recent
years.” (At page 776.)
In the more distant past, the Supreme Court used expansive language (more so that was
necessary to the determination of the case) to describe the required interest that must be held by
the homesteader. “But, even if she merely retained possession of the land, it is of sufficient value
to her to have it protected under the homestead law, and it is of no concern whatever to the
creditor that another has the superior title.” Hill v. First Nat. Bank, 73 Fla. 1092, 75 So. 614 (Fla.
1917). This was a fact specific case with unusual facts; however, the case is typically cited for
the proposition that a homestead can exist on a tenancy in common interest.
It has long been held that a person need not have a fee simple ownership to support that
person’s claim of art. X, § 4 homestead.2 Bessemer Properties v. Gamble, 158 Fla. 38; 27 So. 2d
The Constitution limits the homestead land area that may be exempted, but it does not define or limit the estates in land to which homestead exemption may apply; therefore, in the absence of controlling provisions or principles of law to the contrary, the exemptions allowed by section 1 [now section 4], article 10, may attach to any estate in land owned by the head of a family residing in this state, whether it is a freehold or less estate, if the land does not exceed the designated area and it is in fact the family home place.20 (Emphasis added.)
The holding in Menendez determined that entireties homestead was exempt from joint creditors
under (now) art. X, § 4(a).
12
Geraci’s holding that a leasehold could form the basis of a homestead is based, in part, on
Southern Walls, Inc. v. Stilwell Corp., supra. This case was a case where the creditor attempted
to levy on Mr. Stillwell’s cooperative apartment. He defended that the apartment was his
permanent residence and thereby protected under art. X, § 4(a)21 of the Florida Constitution the
same as a condominium is protected. Faced with Wartels that had decided a co-op unit was not
an interest in real property on nearly identical facts, the 5th DCA said
Under the cooperative form of ownership, the owner receives shares in the cooperation and a long term lease as evidence of his or her title rather than a deed of conveyance. For purposes of the homestead exemption, we find that this is a distinction without a difference.
Southern Walls, supra at page 572.
The author respectfully disagrees. It took a statutory enactment and a constitutional
amendment to make a co-operative unit qualify for the art. VII § 6 homestead tax exemption
because a co-op was not an interest in real property.22 Southern Walls, like Geraci, directly
conflicts with Wartels and Holden v. Gardiner, 420 So.2d 1082 (Fla. 1982). In this instance,
Hoffman v. Jones, 280 So. 2d 431, 434 (Fla. 1973) discusses the doctrine of stare decisis. “To
allow a District Court of Appeal to overrule controlling precedent . . . would be to create chaos
and uncertainty in the judicial forum, particularly at the trial level.” Also see Phillips, supra.
where the 3rd DCA, presented with nearly identical facts with Southern Walls, held:
. . . we note that the language of the Florida Supreme Court in Wartels is of relatively recent vintage and sweeping in its tone. If we were to exhibit disagreement with Wartels--a sentiment that should not be taken from this opinion--we potentially would throw the law of this state into havoc.
Phillips, supra, at page 430.
It is impossible for a court to know all aspects of the law, especially if more obscure
aspects are not briefed or argued. Since the opinion in Southern Walls is silent on the matter, it
is impossible to understand why the case was not decided on the literal language of § 222.05
Fla.Stat. which provides “[a]ny person owning and occupying any dwelling house, . . . on land
not his or her own which he or she may lawfully possess, by lease or otherwise, and claiming
such house, . . . as his or her homestead, shall be entitled to the exemption of such house, . . .
from levy and sale as aforesaid.” It seems this statutory provision would have provided an
13
complete exemption to Mr. Stillwell, rather than bending the interpretation of the constitutional
language to try to make the facts fit.
In re Lisowski, supra explains the relationship of the 222.05 exemption on a leasehold to
an owned constitutional homestead and compares and contrasts the statutory exemption with the
constitutional exemption. This case traces the history of both art. X, §. 4 and F.S. § 222.05
relating to homesteads on leased, as opposed to owned, land.
In 1869, one year after the Constitution of 1868 was ratified, the Florida Legislature adopted Chapter 1,715 as an act of the legislature. Apparently recognizing that a homestead on land that was leased did not qualify for the constitutional homestead exemption for a homestead on land that was owned, the legislature provided that ‘a person owning and occupying any dwelling house on land not his own, which he may possess rightfully by lease or otherwise, and claiming such house as his homestead, is entitled to the exemption of the house from levy and sale.
Lisowski, supra, at page 775.23
It is clear from the unequivocal holding in Wartels that the interest of a homesteader must
be an ownership interest in real property. The common law provides that a leasehold is not an
interest in real property but rather a chattel real. Absent a statute that converts or declares the
leasehold to be an interest in real property for the purposes of article X, a leasehold interest is
insufficient to protect a leasehold residence from creditor’s claims, even if combined with a
stock ownership interest in the land-owning entity.
Geraci issue #2. Can the definition of homestead for art. X, § 4(a)(1) and (b) be a different definition of
homestead than for § 4(c)?
In order to sustain the first holding, the Geraci court acknowledged that it needed to
distinguish its facts so as to avoid the application of Wartels, supra, which would compel an
opposite result. As the Geraci court acknowledged, Wartels holds “that a co-op is not a
homestead for purposes of descent because it is not an interest in realty.” (Emphasis added.) To
distinguish its issue from that in Wartels the Geraci court explains “. . . the homestead protection
at issue in this case is not that of descent and devise [under art. X, section 4(c) as it was in
Wartels]. . . . Instead, this case involves the application of the homestead exemption from forced
sale as set forth in art. X, section 4(a)(1), to satisfy the appellee creditors' claims.” The Geraci
court ruled that the lifetime exemption under § 4(a) (and its inurement under § 4(b)) does not
14
require that the homesteader own an interest in the realty, while § 4(c) of that same article, which
limits the homesteader’s ability to devise the homestead, does.24
This attempt to distinguish the controlling precedent in Wartels, because Geraci involves
a section 4(a)(1) exemption not a 4(c) exemption as was involved in Wartels, is unavailing
because the premise of the Second District was incorrect. Although it is correct that the Wartels
issue was one of limitation on devise in section 4(c), a close reading of Wartels shows that the
Florida Supreme Court conclusion that a homestead must consist of an interest in realty, comes
directly from the language in section 4(a)(1), itself:
The words contained in Article X, Section 4(a)(1) “to the extent of one hundred sixty acres of contiguous land” and the words “if located within a municipality, to the extent of one-half acre of contiguous land” have been repeatedly defined to mean that homestead property must consist of an interest in realty Pasco v. Harley, 73 Fla. 819, 75 So. 30 (1917); Hill v. First National Bank, 73 Fla. 1092, 75 So. 614 (1917); Milton v. Milton, 63 Fla. 533, 58 So. 718 (1912). (Emphasis added.)
Furthermore, more than 30 years earlier, the Florida Supreme Court ruled that the
definition of homestead for the creditor’s exemption in § 4(a)(1) defines homestead for all of § 4,
including the inurement of the creditor’s exemption found in § 4(b), the paragraph at issue in
Geraci.
It is important to read section 4 in its entirety. Subparagraph (a) provides that the homestead and personal property shall be exempt from forced sale and contains the requirement that the property be “owned by the head of a family.” 25 Subparagraph (b) provides that “these exemptions,” referring to homestead rights in general, shall inure to the surviving spouse or heirs of the owner who is a head of family. Subparagraph (c), the provision in issue in this proceeding, begins with the phrase, “The homestead shall not be subject to devise ....” We believe that this refers to homestead as it is otherwise used in section 4. To adopt the construction suggested by the petitioner would create two distinct definitions of homestead; one definition under subparagraphs (a) and (b) of section 4, and another definition under subparagraph (c) concerning the devise of the homestead.26
Holden v. Gardiner, supra, at page 1085
The logical basis by which Geraci tried to distinguish Wartels is by “creat[ing] two distinct
definitions of homestead; one definition under subparagraphs (a) and (b) of section 4, and
another definition under subparagraph (c) concerning the devise of the homestead,” the very
interpretation proscribed by Holden.
15
See also Phillips v. Hirshon, 958 So.2d 425 (Fla. 3d DCA 2007), review dismissed,
Levine v. Hirshon, 980 So.2d 1053 (Fla. 2008), where, consistent with Wartels, the court held:
A cursory reading of Article X, section 4 reveals that while the constitutional benefits of the forced sale exemption and devise and descent restriction are voiced in different subsections of Article X, section 4--compare Article X, § 4(a); (b) (forced sale) with Article X, § 4(c) (devise and descent)--these protections have in common Article X, section 4(a)(1), which defines the physical extent of the benefit if allowable.
It is clear that the Geraci court was unaware that under controlling precedent in Holden v.
Gardiner, supra, it could not differentiate the definition of homestead under any part of art. X, §
4. That differentiation was their basis for ruling contrary to the holdings in Wartels and
Phillips.27 The result is that the Geraci court failed to distinguish its facts or issues from the facts
and issues in Wartels, and Wartels is therefore controlling.
Geraci is simply wrong on issue #2.
Effect of statutory changes on the common law and the issues discussed.
If the definition of homestead for all of § 4 of article X includes the Wartels-stated
requirement that a “homestead property must consist of an interest in realty,” how can the Geraci
decision that Ms. Geraci’s condominium constructed on leased land is exempt from creditor’s
claims under art. X, § 4(a) and (b), be correct? And does this same result apply to cooperative
units and homes constructed on leased property?
The common law character of a leasehold interest may be changed by statute so that it is
real property. Ammerman v. Markham, 222 So.2d 423, (Fla. 4th DCA 1969) (“Ch. 67-339 is a
valid legislative definition of ‘real property’ and ‘dwelling house,‘ as used in the Constitution, so
as to extend homestead tax exemption benefits to owners of condominium and cooperative
apartments beginning January 1, 1969.”); Williams v. Jones, et al., 326 So.2d 425 (Fla 1975).
(“To accept the appellants' contention that the Legislature is without power to so classify such
leasehold interests as real property would not only result in such leasehold interests being taxed
on the reduced intangible personal property ad valorem rate but would also deprive the political
subdivisions wherein the leaseholds are situated from raising revenues from such sources in
order to defray the costs of the services supplied to the users thereof. . . .”)
16
The solution in Geraci is to find (or perhaps create28) a statute changing the common law
to recharacterize a dwelling built on a leasehold as an interest in real property for the purposes of
art. X, § 4. Then that interest will meet the requirement in art. X, § 4 that the owned property is
real property (or an interest therein) owned by a natural person and § 4(b) will allow the
decedent’s exemption to inure.
The answer as it applies to a condominium constructed on leased land, the Geraci
situation, is easiest. However, it is also elusive. It eluded the parties in the trial court and the
trial judge; it eluded the party and the panel in the Second District, it eluded this author through
several drafts of this article that concluded Geraci reached the wrong result, and it eluded every
lawyer the author spoke with about the correctness (or incorrectness) of the Geraci decision. But
it is still crystal clear.
718.106 Condominium parcels; appurtenances; possession and enjoyment.—
(1) A condominium parcel created by the declaration is a separate parcel of real property, even though the condominium is created on a leasehold. (Emphasis supplied.)
This statute is the reason the result in Geraci, that the condo was exempt from the
decedent’s creditors and inured to decedent’s heirs under art. X, § 4(b), was a correct
result even though the court’s reasoning to reach that conclusion was flawed. The Geraci
condo was an interest in real property pursuant to § 718.107 Fla.Stat., which passes the
Wartels test.
I know, I could have saved a great deal of your valuable time if I had simply told
you the answer at the beginning. I’ve heard it all before. Had I done so, you would have
missed the wondrous sights along the yellow brick road, made friends with some unusual
characters and would not have seen behind the wizard’s curtain. My purpose here was not
to give you the answer, but rather for you to understand the law. This is especially true as
it relates to a cooperative unit, and also necessary as it relates to a home.
The answer regarding the home on leased property also seems obvious. I’ve
found no statute that changes the common law so as to reclassify a leasehold on which a
home is constructed as an interest in real property for purposes of article X, unless that
statute as well eluded me as did the one related to condominiums for so long.
17
The bankruptcy case of McAtee, supra, held a single family residence constructed
on a 99 year lease from the Santa Rosa Island Authority, an agency of Escambia County,
Florida, to be exempt from creditor’s claims under art. X, § 4(a). The holding in this case
is based on § 196.199(7) Fla.Stat. that reads: "Property which is originally leased for 99
years29 or more, exclusive of renewal options, shall be deemed to be owned for purposes
of this section." This statute clearly changed the common law to recharacterize a 99-year
leasehold interest as an interest in real property for purposes of taxation. By its own
language, it is limited to a single section of the Florida Statutes, 196.199, which provides
that a tenant who leases property from a governmental agency for an initial term of 99
years is taxed on the property as if he or she were the owner. For this court to say this
statute, so limited in scope and for one special purpose, has changed the nature of a
common law chattel real for purposes of a different section of the Florida Constitution, is
far too great a stretch to withstand logical scrutiny. Although Geraci relies on McAtee for
authority, even Southern Walls, did not cite McAtee.
The art. VII definition of homestead for purpose of ad valorem taxation and
exemptions may, and often does, differ in its definition from the definition of homestead
in art. X, § 4. Phillips v. Hirshon, 958 So.2d 425, 427 FN3 (Fla. 3d DCA 2007). This is
specifically because the common law classification of a lease as a chattel has been
changed by statute to be an interest in land, typically solely for purpose of taxation of the
lessor’s interest. See also Bowers v. Mozingo, 399 So.2d 492 (Fla. 3d DCA 1981). (“This
case is governed by Article X, Section 1 [now 4], Constitution of the State of Florida
(1885), which exempts a homestead from forced sale and provides that no judgment or
execution shall be a lien thereon. Clearly, this is a different thing than homestead
exemption, as defined for tax purposes. [Citation omitted.] Therefore, the appellee's
reliance on Article X, Section 7, Constitution of the State of Florida (1885) is
misplaced.”)
A house built on a leasehold is and continues to be a chattel real and is not
qualified for the creditor’s exemption (or the devise limitation) provided in art. X, § 4.
The cooperative unit answer is more difficult. The Florida Supreme Court in
Wartels has ruled that a cooperative unit is not qualified for homestead status under
18
article X, section 4 because it is not an interest in real estate. After the rights had vested
in Wartels (1975), in 1976 the legislature adopted the Cooperative Act, chapter 719
Fla.Stat. That act has some non-specific language that can be argued for the fact that the
chattel real character of a cooperative unit has been changed by statute into an interest in
real estate. In fact Southern Walls strained to find language in the Cooperate Act that
characterized the cooperative unit as an interest in real property.30 Subsequently, Phillips
v. Hirshorn, on nearly identical facts, declined to follow Southern Walls, but instead held
consistent with Wartels. Philips was certified as a matter of great public importance and
the high court accepted jurisdiction. Briefs were filed, and the high court subsequently
entered its order discharging jurisdiction, without ruling and without explaining the
discharge. What is the effect of this? Was th court saying, “we already ruled on this in
Wartels, and Phillips, having followed our precedent in Wartels will not be disturbed”?
Was it saying something else? What about the contrary opinion in Southern Walls? That
answer is unclear.
The Cooperative Act has no direct language, as is found in the Condominium Act,
which states “A condominium parcel created by the declaration is a separate parcel of
real property, even though the condominium is created on a leasehold.” This statute is
clearly in derogation of the common law and must be strictly construed. However, it is
the author’s opinion that § 718.106 Fla.Stat. passes this test because it is clear and
unequivocal and subject to only one interpretation. Nothing like this exists in the
Cooperative Act, and, at best, the argument (made as strongly as possible in Southern
Walls) that the language of that Act has converted the common law chattel of a
cooperative unit into an interest in real estate, is a total failure.
It is this author’s opinion that although a condominium built on a leasehold
qualifies under art. X, § 4, that a cooperative unit does not. This is somewhat tempered
by the fact that a cooperative unit should receive lifetime creditor exemption coverage
from § 222.05 Fla.Stat.; however, its devise is not limited and the homesteader’s
exemption does not inure to heirs.
The result of this is:
19
• A co-op is entitled to the homestead tax exemptions.
• A co-op is not devise restricted
• The spouse of the owner need not join in a deed or mortgage.
• After death, creditors claims can be paid from the value of the co-op
• The co-op is an asset of the estate for purposes of administration and for payment of fees.
Could a statutory change effect parity between condos and co-operative units?
Yes. Either the Cooperative Act could be amended to provide that, for purposes of article
X, § 4, a co-operative unit is real property. Alternatively, § 222.05 could be amended to
provide that the exemptions will inure to heirs of the homesteader, including any
limitations desired on that result.
Conclusion.
Geraci correctly held that art. X. § 4 exempt homestead could exist in a condominium on
leased land. That result is correct only because the residence was a condominium and then only
because § 718.106(1) Fla.Stat., provides a condominium parcel built on a leasehold is real
property. The general rule is that an art. X, § 4 homestead can only exist on an owned interest in
real estate. In the instance of a condominium, that interest which would otherwise be a chattel,
has been converted to an interest in real property by the statute. Some ownership interest in the
land is required to support this type of homestead.
As to a separate home built on leased land, there is no such retreat from common law
principles characterizing the “owner’s” interest as ownership of a chattel, and therefore, article X
homestead status would fail.
Finally, in the instance of a cooperative unit, the answer is more uncertain. The statutory
enactments in chapter 719 post-dating Wartels have nibbled around the edges of the common
law, but statutes in derogation of the common law are to be strictly construed. The
countervailing consideration is that exemption statutes are to be liberally construed to achieve
their purpose. However, chapter 719 is not an exemption statute, per se. It is therefore the
author’s opinion that until the legislature acts in some manner to extend the article X § 4(b) or §
222.05 Fla.Stat. exemption to a cooperative unit, there is substantial doubt that it is exempt in the
hands of the decedent’s heirs. Of course, § 222.05 Fla.Stat. exempts the cooperative unit for the
20
homesteader, but does not do so for the heirs of the homesteader. The homestead problems study
committee of the RPPTL section of The Florida Bar is studying this issue and possible solutions
through legislation.
1 Article X, s. 4 of the Florida Constitution provides: SECTION 4. Homestead; exemptions.—
(a) There shall be exempt 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, the following property owned by a natural person:
(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family;
(2) personal property to the value of one thousand dollars. (b) These exemptions shall inure to the surviving spouse or heirs of the owner. (c) The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except
the homestead may be devised to the owner’s spouse if there be no minor child. The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law.
2 “According to the ‘longstanding principle of appellate law’ known as the ‘tipsy coachman’ doctrine, an appellate court should affirm a trial court that ‘reaches the right result, but for the wrong reasons’ if there is ‘support for the alternative theory or principle of law in the record before the trial court.’” Shands Teaching Hosp, and Clinics, Inc. v. Mercury Ins. Co. of Florida, --- So.3d ----, 37 Fla. L. Weekly (Fla.,2012). 3 Under that classification, the Florida courts have granted homestead status to a legal life estate (King v. King, 652 So. 2d 1199, (Fla. 4th DCA 1995)), a tenancy in common interest (Milton v. Milton, 63 Fla. 533, 58 So. 718 (Fla. 1912)), an entireties ownership (Oates v. New York Life Ins. Co., 113 Fla. 678, 152 So. 671 (Fla. 1934)) and a beneficial interest in the fee (Bessemer Properties v. Gamble, 158 Fla. 38; 27 So. 2d 832 (Fla. 1946)). 4 Only a small part of condominium units are constructed on leased land (although leased recreation areas were more common) and an even smaller number of traditional homes are. 5 See chapter 617 Florida Statutes. 6 719.103 (2) Fla.Stat. defines a cooperative association. “Association” means the corporation for profit or not for profit that owns the record interest in the cooperative property or a leasehold of the property of a cooperative and that is responsible for the operation of the cooperative. 7 In Thalmeimer, the court ultimately found Tischler’s interest to be an equitable interest in real property because his lease included an option to purchase, and a right to be reimbursed for improvements placed on the property during the lease term, thereby creating an equitable interest in the lot. 8 Department of Revenue v. Dix, 362 So.2d 420 (Fla. 1st DCA 1978) 9 Straughn v. Sun Oil Co. (Delaware) 345 So.2d 1062 (Fla. 1977) 10 State Road Department v. White, 148 So.2d 42 (Fla. 1963). 11 Rogers v. Martin, 87 Fla. 204, 99 So. 551 (Fla. 1924)
21
12 Before January 1, 1969, for purposes of art. VII (the homestead ad valorem tax exemption) a cooperative unit was not considered an interest in land and for that reason, was not entitled to an ad valorem tax exemption. FL Op.Atty.Gen., 066-38, April 14, 1966 (A person occupying a parcel of property under a 99 year lease does not have sufficient interest in real estate to be eligible to qualify as a freeholder.) 13 This section’s implementing legislation is F.S. § 193.155. 14 This section’s implementing legislation is F.S. § 196.041. 15 Other tax exemptions are also provided in art. VII, § 4(d)(1), Fla.Const. including an exemption from the amount of the ad valorem tax to a permanently disabled combat veteran equal to the percentage of combat related permanent disability. 16 Although art. VII (tax exemptions) homestead and art. X (creditors exemptions and devise limitation) homestead share similar characteristics there are significant differences. Phillips v. Hirshon, supra; Estate of Wartels, supra. Hence, precedent for art. VII homestead may not always be applicable to homestead in art. X. This article will highlight those differences. 17 Phillips v. Hirshorn, supra, at page 429. “We have recognized this legal principle. Miami Country Day Sch. v. Bakst, 641 So.2d 467, 469 (Fla. 3d DCA 1994)(holding that a houseboat in a fixed location connected to a dock was a “dwelling house” within the meaning of section 222.05 of the Florida Statutes (1993), defining when certain homesteads located on leased properties are entitled to protection from forced sale under Article X, section 4(a)).” 18 The court also cited and relied on In re Alexander, 346 B .R. 546, 549–50 (Bankr. M.D.Fla. 2006) that held art. X s.4 homestead could exist on land owned by a revocable trust. Alexander relies on In re Dean, supra, In re McAtee, supra and Southern Walls, infra. In Alexander, the homestead was titled in a revocable trust and the bankruptcy court found that to be an equitable interest sufficient to support the claim of homestead. 19 Also see The Fund Title Note 19.01.03 which, based on these cases, requires joinder in a lease assignment of a residence by the spouse of the lessee, if married, if the property would otherwise be homestead. 20 Although the concurring opinion held the interest on which the homestead was based could be a “freehold or less estate,” the later decision in Wartels, supra, disagreed requiring that the interest of the homesteader be “an interest in the realty.” 21 Geraci claimed protection under art. X., § 4(b) which are the same exemptions described in § 4(a). 22 F.S. § 196.041(1) specifically makes the homestead tax exemption available to long term lessees and owners of a co-operative apartment.
“. . . lessees owning the leasehold interest in a bona fide lease having an original term of 98 years or more in a residential parcel or in a condominium parcel as defined in chapter 718, or persons holding leases of 50 years or more, existing prior to June 19, 1973, for the purpose of homestead exemptions from ad valorem taxes and no other purpose, shall be deemed to have legal or beneficial and equitable title to said property. In addition, a tenant-stockholder or member of a cooperative apartment corporation who is entitled solely by reason of ownership of stock or membership in the corporation to occupy for dwelling purposes an apartment in a building owned by the corporation, for the purpose of homestead exemption from ad valorem taxes and for no other purpose, is deemed to have beneficial title in equity to said apartment and a proportionate share of the land on which the building is situated.” The Florida Constitution, art. VII, § 6(a) provides a specific homestead tax exemption to owners of a
cooperative unit:
22
The real estate may be held by legal or equitable title, by the entireties, jointly, in common, as a condominium, or indirectly by stock ownership or membership representing the owner’s or member’s proprietary interest in a corporation owning a fee or a leasehold initially in excess of ninety-eight years. No corresponding constitutional or statutory authority exists for leasehold-based residential units for art.
X, § 4 purposes. It is not, possible, therefore, to argue that the art. X, § 4 creditor’s exemption applies to a cooperative unit because it receives an exemption from taxation under art. VII, § 6.
23 Geraci considered both Phillips v. Hirshon and In re Lisowski and disagreed with the conclusion in these cases. “We recognize that at least two courts have refused to so distinguish Wartels. See In re Lisowski, [citation omitted] [and] Phillips v. Hirshon, [citation omitted]. . . . we do not find the reasoning of these cases persuasive because they do not adequately reconcile the supreme court's decision in Wartels with the court's jurisprudence extending the exemption from forced sale to other beneficial interests in land and not limiting the exemption to a fee simple interest.” (Geraci at page 387) 24 “Thus, Wartels is inapposite, and the general rule that a fee simple estate is not necessary to the forced sale exemption applies. See Dean, 177 B.R. at 730; S. Walls, 810 So.2d at 572.” Geraci at page 378. 25 Author’s note. The “head of a family” requirement was deleted from the constitution as of January 3, 1985, however this is not relevant to this article. 26 This holding in Holden is not well indexed. The Westlaw headnote for this part of the case does not make reference to this statement and Phillips v. Hirshorn, that reached the same conclusion, did not cite Holden or any other authority for that conclusion. 27 The Geraci opinion recognizes a contrary holding in Lisowski, supra, and Phillips, supra. “We recognize that at least two courts have refused to so distinguish Wartels. . . . However, we do not find the reasoning of these cases persuasive because they do not adequately reconcile the supreme court's decision in Wartels with the court's jurisprudence extending the exemption from forced sale to other beneficial interests in land and not limiting the exemption to a fee simple interest.” (Geraci at page 3.) Of course, the cases do not limit the exemption to “a fee simple interest,” rather to an interest in real property, including equitable interests in the land. See Bessemer, supra. 28 The Homestead Problem Studies Committee of the Real Property, Probate and Trust Law Section, Shane Kelley, chair, has potential legislation on its project agenda. 29 In the current version of the statute, the required term is 100 years. 30 Interestingly, this could have been a reason for the Fifth District to rule directly opposite to the Supreme Court in Wartels, but the court never discussed this fact.
