Bill,
Check your email. There is no current court case on this new revision, unfortunately...See attached 'new rules' and statute. The new statute was changed from "entire" property to "Substantial Portion" or 'Substantially all'. What that means, no one knows and the interpretation is going to be different for each county until it is decided in the courts since there was not a statutory definition. Square footage is probably going to be the deciding factor, since the PAO can take the Sq./Ft. portion being rented (or utilized as a business) and reduce the exemption accordingly.
The Haddock vs. Carmody case (attached) was the last high court opinion on the issue, but that case deals with the "entire" property statutory definition. Black's law Dictionary used for statutory construction definitions, states that substantial means: "Of real worth or importance; of considerable value; not seeming or imaginary; not illusive; something worthwhile as distinguished from something without value or merely nominal. Extremely vague at best although the plain language rule applies. The plain language rule dictates that statutes are to be interpreted using the ordinary meaning of the language of the statute, unless a statute explicitly defines some of its terms otherwise. In other words, the law is to be read word for word and should not divert from its ordinary meaning In regard to the new statute's language. Your County PAO Attorney can best guide you on that issue since I cannot give you legal advice, just the facts and my opinion.
As the new case of Garcia vs. Andonie states (See attached, pg. 9), under the requirements of section 196.031(1), every property owner seeking the constitutional ad valorem tax exemption must establish that he is residing on the Florida property, regardless of whether the tax exemption is being claimed because the property is being maintained as the permanent residence of the property owner or as the permanent residence of the owner's dependents. See §196.031(1), Fla. Stat. (2006). Accordingly, the "and who resides thereon" element of entitlement set forth in section 196.031(1)—although accurately reflecting the requirements contained in the Florida Constitution as it existed before the 1968 revisions—is inconsistent with the requirements of the constitution as amended in 1968. This means that the actual 'residing on' the property is no longer applicable.
The legislature established criteria to be utilized for determining "permanent residency" (the requirement for qualifying for homestead). For example, in F.S. §196.015 (2009), the legislature provided property appraisers with criteria to utilize in determining permanent residency. The criteria include an assessment of the address provided on items such as a recorded sworn statement of domicile, voter registration, driver's license, utility statements, bank statements, vehicular registration, and business licensure....but not one of these items can be used to establish or deny residency, as the statute states (See FL Stat 196.015, attached).
However, in contrast to cases dependent on whether an owner qualifies for homestead (e.g., whether the owner meets the criteria of §196.015), the rental statute appears to assume that the property owner has already established or qualified for homestead. The inquiry becomes whether the now established right to homestead has been abandoned. Legal abandonment boils down to two issues, 1) Entire rental of the property (Now 'Substantial Portion" depending on statutory construction) or 2) claiming a new primary residence/homestead exemption.
Lest there be any doubt on this point, I respectfully pose the following question: How can a right be "abandoned", especially if the owner had not qualified for the right to begin with? Moreover, recall that §196.061 is entitled "Rental of homestead to constitute abandonment." The distinction between qualifying for the right and having the established right taken away by deeming it abandoned is important because Florida courts have deferred to property appraisers in cases addressing the act of qualifying for homestead. By contrast, Florida courts have, with a few notable exceptions, zealously protected the established right to homestead once it has been granted by the PAO.
By contrast, once the right to homestead has been established, Florida and federal courts have generally been protective of the right in cases both when homestead is used as a shield against creditors and when the established right to homestead has been called into question. A 2001 decision from the Florida Supreme Court in the case of Havoco of America, Ltd. v. Hill, 790 So. 2d 1018 (Fla. 2001), illustrates the deference given to the homeowner once homestead has been established. The Florida Supreme Court held:
[T]his Court's homestead exemption jurisprudence has long been guided by a policy favoring the liberal construction of the exemption: "Organic and statutory provisions relating to homestead exemptions should be liberally construed in the interest of the family home. A concomitant in harmony with this rule of liberal construction is the rule of strict construction as applied to the exceptions.
The Florida Supreme Court's decision in Havoco was consistent with an earlier decision of the Second District Court of Appeal in the case of Poppell v. Padrick, 117 So. 2d 435 (Fla. 2d DCA 1959). In that case, the property owners' homestead status was restored when the owners rented their homesteaded property to live with their widowed mother for a number of months over the course of several years. The Second District held:
Once the property has acquired the status of a homestead, this status would continue until an abandonment has occurred which being dependent upon the intent of the claimant, is a question of fact to be determined in each particular case. . . .
In considering the question of whether a homestead status has been acquired or whether it has been abandoned, a court in its determination must be guided by certain fundamental principles. The constitutional and statutory provisions concerning homesteads should be interpreted in the liberal and beneficent spirit in which they were conceived and enacted in the interest of the family home.
In what could be viewed as an split from the Florida Supreme Court's pronouncement in Havoco and the Second District Court of Appeal's decision in Padrick, the First District Court of Appeal recently held that the rule of strict construction for nonconstitutional exemptions applies to the rental statute. In Haddock v. Carmody, 1 So. 3d 1133 (Fla. 1st DCA 2009) - Attached, the First District Court of Appeal held that the owner of a condominium on Amelia Island had abandoned homestead under the rental statute even though the owner had locked two closets prior to leaving the unit. The property owner argued that it had not rented the "entire dwelling" and, therefore, the rental statute did not apply. Based on the totality of the circumstances, the First District held that the owner had abandoned his homestead for the years in question. However, the First District went a step further and lumped cases involving the rental statute with other cases pertaining to the qualification for homestead.
In this regard, an argument could be made that the First District's holding in Haddock directly conflicts with the Second District's earlier opinion in Padrick. Again, in Padrick, the Second District, relying on prior opinions from the Florida Supreme Court, had stated "[t]he constitutional and statutory provisions concerning homesteads should be interpreted in the liberal and beneficent spirit in which they were conceived and enacted in the interest of the family home."
It does not appear that the First District has attempted to create a stern stance on the issue of statutory construction, especially when doing so would create a conflict with holdings of the Florida Supreme Court and other district courts. I would submit that Haddock may be harmonized with other cases interpreting homestead. Put simply, Haddock should be read as a case where the sheer weight of the evidence mandated the revocation of homestead. However, as illustrated in Haddock, it can be said that the rental statute is ambiguous as it fails to provide definitions for the terms "rental" and "entire dwelling" which now reads 'substantially all'...
The rental statute does not explicitly define what constitutes the "substantially all" of one's homestead. The same applied for the previous statute in regards to "entire". Again, the Haddock court held that excluding two closets from a rental did not preserve homestead. In reaching this conclusion, the First District rejected giving the term "entire dwelling" its literal meaning. The First District reasoned that the literal meaning could lead to absurd results whereby the homeowner avoids application of the rental statute by excluding a de minimus, or minimal portion of his or her property from rental. However, it does not appear that the First District intended to simply ignore the words "entire dwelling," as doing so would contravene a seminal rule of statutory construction requiring courts to give meaning to each word.
By contrast, the tenor of the opinion suggests that the court did not want to reward a property owner who, in all respects, appeared to have legally abandoned homestead. In particular, the owner's unit was located on Amelia Island, which is commonly understood to be a resort-oriented community. Second, the owner's unit was placed into a corporate rental pool, and the owner had to act affirmatively to withdraw the unit for his personal use. Last, the owner locked off two closets, which again the court appears to have treated as a nominal amount of space. As such, the First District refused to allow the homeowner to hang his hat on a singular argument that because a closet was locked off to tenants, the "entire dwelling" was not rented and, therefore, homestead was saved. I would agree...
To harmonize Haddock with past homestead jurisprudence, Haddock should be viewed as providing a baseline for the future until an appellate court rules on the statutory definition. In particular, "entire dwelling" does not mean two closets where the totality of the circumstances militate against homestead (e.g., the presence of a corporate rental pool and the property's location in a resort community) nor does substantially all'. However, moving beyond the baseline, it is important to note that the term "substantially all" should be given its plain and ordinary meaning under the rules of statutory construction. The question necessarily becomes whether "substantially all" means the living areas of the house (e.g., bedrooms or common areas) or if it simply means more than a minimal amount of space. Only time will tell, and PAO's that deny will have to end up in court to get a statutory 'definition' or a more clear construction by the courts.
Webster's dictionary defines the term "substantial" to mean "consisting of or relating to substance, not imaginary or illusory : REAL, TRUE, IMPORTANT, ESSENTIAL; ample to satisfy; considerable in quantity; significantly great; firmly constructed; being largely but not wholly that which is specified." I am cognizant of the First District's admonition against reading the rental statute too literally. However, the legislature has generously defined the term "dwelling" in at least two other sections of the Florida Statutes, and those definitions include the porch and curtialige of the property.
Reading the terms "substantially all" and "dwelling" together, a good faith argument could be made that so long as the portion excluded is not minimal, the rental statute should not apply. In this respect, Padrick and its progeny are instructive. In particular, I would submit that the area and possessions excluded from rental square footage should evince the owner's intent to return to the home. Remember, intent coupled with actual use is all that is required to maintain a homestead.
Therefore, leaving only a small amount of clothing and personal effects in a limited area may militate in favor of finding for abandonment. In contrast, the owner who leaves the bulk or all of his or her possessions on site or even locks such possessions in large walk-in closets could be viewed as maintaining an intent to return sufficient to defeat a claim of abandonment.
Although such a conclusion finds support in cases predating Haddock, it is expected that statewide county property appraisers will argue for a more stringent application of Haddock and the subsequent statute changes, but you have to be cautioned that courts render decisions on such matters on a case-by-case factual basis. I believe that in the coming years, property appraisers will aggressively pursue the removal of homestead in which the homeowner has engaged in any form of rental. However, the rental statute is still somewhat ambiguous and does not provide homeowners or PAO's with adequate guidance in terms of the nature of rentals and what the "substantial portion" / size/sq. ft. requirements are of the portions of the dwelling to be rented. These ambiguities have been compounded by the First District's previous decision in Haddock which superficially purports to unwind long-standing precedent from the Florida Supreme Court, to no avail, since it is a lower court.
I hope this helps as far as the history and the new law requirements. If I can be of further assistance, please do not hesitate to call upon me...as I would be happy to help.
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