There’s No Place Like Home

HOMESTEAD, by any other name (at least in Texas) would sound as sweet. Homestead evokes a picture of a pastoral setting, house on the hill, cows in the pasture, an old board and batten “ dog run” house in the river bottoms, etc, but a homestead is deeply ingrained in Texas statutory law and common law.

The Texas Property Code §41.002 defines a homestead as either urban, rural or business quick to point out that a party may claim only one homestead.

An urban homestead consists of not more than 10 acres of land in one or more contiguous parcels and all improvements thereon. A property is considered urban if it is located within the boundaries of a municipality OR its extraterritorial jurisdiction OR a platted subdivision AND it is served by police protection, paid or volunteer fired protection and at least three (3)of the following services provided by a municipality or under contract to a municipality; (1) electric, (2) natural gas, (3) sewer, (4) storm sewer, AND (5) water.

A rural homestead for a married person consists of 200 acres in one or more parcels and all improvements thereon.

A single person’s homestead consists of 100 acres in one or more parcels including improvements thereon.

A Texas Court decision states that possession and use of land by one who owns it and resides upon it with the intent that it be his homestead, makes it a homestead. To establish homestead rights, one must show by overt acts an intention to claim the property as homestead. Another states that vacant land may be homestead if the owner presently intends to occupy and use the land as his homestead in a reasonable and definite period of time in the future and has made preparations for such use and manifest beyond doubt the party’s intent to complete the improvements and reside upon the place as a home.

Each spouse in a marriage has a separate and undivided right to possession in their homestead property. Both spouses are entitled to claim homestead rights in a property used as homestead whether the property is owned by both spouses, by one spouse, or even by a third party.

Temporarily renting a property does not change the fact that it is homestead. Temporarily changing address, even states does not serve to abandon a Texas homestead. Once the rights to claim a homestead are established it is difficult to lose due to temporary changes. Temporary may be for a long time, such as a person is moved out of state for his employer. If he does not establish another homestead in the other state, he is still entitled to claim his Texas homestead.

Making it more interesting is the business homestead exemption. It may extend to two (2 or more) non-contiguous lots when they are used as a place for the operation of the business (or calling) of the head of a family and both are essential to and necessary for such business, not merely being used in aid of the business.

What’s the big deal about a Texas homestead you are asking? Plenty. A homestead is exempt from collection efforts from general creditors. It is entitled to preferential treatment by the taxing entities. A homestead will survive a bankruptcy so a person does not necessarily lose his home. Equity in a homestead cannot be taken to satisfy a judgment. As in all things there are exceptions to these exemptions, but for general purposes, the homestead is inviolate, unless you owe the IRS and then all bets are off.

So, unless the tax man cometh, or the mortgage company forecloses, you can keep your homestead and/or business homestead property and have another chance to succeed.

Even more exciting is the fact that even if there is a judgment against you, you can sell your homestead and the cash proceeds are exempt for six (6) months to give you a chance to buy another homestead and protect the proceeds from your original homestead. So general creditors for all purposes cannot attach the proceeds from the sale of a homestead until after six (6) months have passed from sale and receipt of the sales proceeds..

Protect your claim of homestead and it will survive most of the debt problems life throws at you. It can be a great source of comfort, or if needed, it ca n be a great source of cash, safe from your general creditors.

Is Texas is a great place to live, or what?

THIS ARTICLE IS FOR INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS LEGAL ADVICE. This does not constitute the establishment of an attorney client relationship between you and this lawyer. Most information is of a very general nature and cannot attempt to cover all fact situations. Nothing contained in this article should be construed to constitute a recommendation of any product, service, or web site.

Weston Cotten is admitted to practice in all Texas Courts, all Federal District Courts in Texas, and the U. S. Tax Court. He is a member of the College of the State Bar of Texas.

Please visit his website at westoncotten.com or call at 281-421-5774. Principal (and only) office is located at 5223 Garth Road, Baytown, 77521.