Title Insurance 101 – Homestead Exemptions

Janice Carpi is the National Underwriting Counsel for GRS Group

Homestead exemptions were created by statute in various states in the 1800’s and are a purely American creation.  Historically, the homestead exemption gave the head of a household the right to protect the family home from the grasp of creditors, up to a set monetary amount.  Texas was the first state to pass a homestead law, and other states later followed suit.  The idea behind the homestead exemption was to protect a man’s wife and children from his poor decisions, bad habits or gambling debts, which would leave the man’s property subject to levy by his creditors, who, like Snidely Whiplash, would evict the helpless wife and children from their family home, leaving them destitute in the streets.

Early homestead laws set the exemptions at around $1,000.  Back in the 1800’s, this was probably more than enough to protect the equity in the home, leaving whatever value the home had over the exemption liable for debts.  The problem is that homestead exemptions have never kept up with inflation.  Many current homestead statutes allow exemptions averaging around $10,000 -$20,000, which wouldn’t even protect the roof of most homes today.  Texas is one of the only states that I know of that has an acreage, instead of monetary limit.  Texas homestead law is part of the state’s constitution, and provides for up to one acre of land for a homestead in an urban area, or two hundred acres for a family’s rural homestead (one hundred acres for an individual’s rural homestead).  Like Texas, many states have expanded the right of homestead to single or unmarried individuals, and not limited it only to families or heads of household.  The homestead is created by actual use of the property as a residence, and most states require a declaration of homestead to be filed in order to claim the protections of the exemption.

In some states, if the homestead is the property of a married couple, the conveyance or mortgage of the homestead property by only one spouse may be ineffective to release the homestead rights affecting the homestead, even if the property is owned by only one of the spouses.  The joinder of the non-owner spouse is required in order to evidence the relinquishment of his or her homestead rights.  In some cases, actual joinder in the deed is not required, so long as a written relinquishment of the homestead rights is provided.  All of this depends on state law or practice, and you should contact your title agent for further information on local requirements.

Here is a link to a short article published by the Texas State Historical Association, which gives you a little more information on the history of the Texas homestead law:  http://www.tshaonline.org/handbook/online/articles/mlh02.

                                                                                                                                                                                                                               

Here is my usual caveat:  This article is not intended to be a comprehensive discussion of the topic.  Should the reader desire to learn more on the topic, additional information can be found in most legal treatises on real property law.  The opinions stated in this blog are those of the writer, and should not be construed to be a statement of fact or conclusion of law.  Any statements herein should not be relied upon in any litigation, arbitration or mediation.

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