Homestead Exemption
By David Pederson, Partner, January 25, 2021
We know that understanding Texas unique homestead laws can be confusing, even tiresome. And every situation is unique. But here are some of the basic concepts, explained.
Texas Homestead Protection
In Texas, the homestead is typically the place of residence for a family or a single person, which is protected from forced sale by general creditors. Each spouse, or single person, has a possessory right in the homestead, which is lost only by death or abandonment and cannot be compromised by waiver or voluntary act of the homestead owner. The homestead is exempt from forced sale by a homestead claimant's general creditors. The homestead cannot be mortgaged unless the mortgage is for one of the following eight purposes as provided by Section 50 of Article XVI of the Constitution:
For the purchase of the homestead, usually with a vendor’s lien from the seller;
To pay ad valorem taxes due on the homestead property;
For construction of improvements on the homestead with a mechanic’s lien contract;
By creating an Owelty lien either in a divorce or a property division among co-tenants where the property is incapable of partition;
To pay federal tax liens that are filed against all the owners personally;
For a home equity loan or a refinance of a home equity loan;
For a reverse mortgage; and
Conversion and refinance of personal property lien secured by a manufactured home to a real property lien.
Any mortgage that does not secure a debt covered by one of those purposes would not be enforceable against homestead property.
Who Must Sign?
Each owner and the spouse of each owner must sign a conveyance or security instrument covering homestead property. The Texas Constitution provides that provides "… an owner or claimant of the property claimed as homestead may not sell or abandon the homestead without the consent of each owner and the spouse of each owner…"
What About Property That Is Not The Owner’s Homestead?
Non-homestead property such as a second home located in Texas does not have the unique protection from creditors that is provided for homesteads. In order to confirm that a second home is not the owner’s homestead, Texas law provides that "…A purchaser or lender for value without actual knowledge may conclusively rely on an affidavit that designates other property as the homestead of the affiant and that states that the property to be conveyed or encumbered is not the homestead of the affiant."
Rural vs. Urban Homestead
"The homestead, not in a town or city, shall consist of not more than two hundred acres of land, which may be in one or more parcels, with the improvements thereon; the homestead in a city, town or village, shall consist of lot or contiguous lots amounting to not more than 10 acres of land, together with any improvements on the land; provided, that the homestead in a city, town, or village shall be used for the purposes of a home, or as both an urban home and a place to exercise a calling or business, of the homestead claimant, whether a single adult person, or the head of a family; provided also, that any temporary renting of the homestead shall not change the character of the same, when no other homestead has been acquired; provided further that a release or refinance of an existing lien against a homestead as to a part of the homestead does not create an additional burden on the part of the homestead property that is unreleased or subject to the refinance, and a new lien is not invalid only for that reason."
An urban homestead for an individual or family may include up to ten acres if all part of one contiguous tract, including the improvements situated on that parcel of land. A rural homestead for an individual may not exceed 100 acres, and a rural homestead of a family may be up to 200 acres; a rural homestead may be in one or more parcels, so long as the home is situated on one of those parcels.
Frequently Asked Questions
Can one spouse create a mortgage on the homestead without the consent of the other spouse?
No, Texas Constitution requires the joinder of both spouses in all conveyances or mortgages of the homestead, even if the homestead is separate property and in the name of only one spouse. This is also true for home equity loans.
Do pre-existing judgment liens of general creditors attach to a homestead?
No, if at the time of acquisition the property is a homestead. If, however, the homestead is abandoned, the judgment attaches at that time.
Do judgment liens, which arise subsequent to the acquisition of a homestead, affix a lien on the homestead?
No, a judgment lien cannot attach to a homestead. Additionally, if the homestead is sold, the proceeds from the sale are exempt for six (6) months in order to allow for the purchase of a new homestead.
Can a property owner waive his homestead rights?
No, the courts have consistently held that one cannot waive their constitutionally guaranteed rights. If, however, the homestead is in excess of that allowed by law, the owner may designate that portion of the property which is homestead.
Does a temporary renting of the homestead abandon the homestead?
No, actual abandonment coupled with an intent not to return must be demonstrated to show abandonment. The best evidence of that would be acquiring and changing residence to a new homestead.
Can a married, but separated, couple each have a homestead?
No, the homestead laws contemplate the family as one unit for married individuals.
In this blog post concerning legal and regulatory matters of interest to the mortgage industry, Sandler Law Group (SLG) provides general information and industry observations that are not motivated by or concerned with a particular past occurrence or event, or a specific existing legal problem of which SLG is aware. Nothing published herein is intended to constitute legal advice and the use of the blog post by a reader shall not give rise to an attorney-client relationship with SLG. SLG expressly disclaims any representation of accuracy or reliability as to the content of this blog post, as well as any obligation to maintain such content over time or to ensure it is free from errors. Brad Cope is the attorney responsible for the SLG content of this blog post. Unless otherwise noted, the attorneys of SLG are not certified by the Texas Board of Legal Specialization.