Non-Mortgage Waiver of Florida Homestead Protection Allowed!

Florida provides an exemption against forced sale for homestead property. This arises under Florida’s Constitution, which provides:

"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 his family[.]" Art. X, § 4(a), Fla. Const. (2004).

Generally, a homestead owner can get around this limitation and provide an interest which can be reached by a creditor by providing the creditor with a mortgage on the homestead property. The question arises whether the homestead owner can be waived outside of a mortgage - for example, in a provision under a contract?

Florida’s Third District Court of Appeal recently had reason to address this issue, when a law firm included a provision in a retainer agreement with its client that the client waived homestead protection in regard to collection of attorney’s fees. The Florida Supreme Court has previously ruled that such waivers would not be enforceable (Sherbill v. Miller Mfg. Co., 89 So. 2d 28 (Fla. 1956)) , so one would expect the Third DCA to follow this precedent and disallow the waiver. However, the Court instead said that the Supreme Court case was based on a prior version of the Constitution, and under the current homestead provision the homestead protection can be waived outside of a mortgage. Demayo v. Chames and Heller & Chames, P.A., 3rd District. Case No. 3D04-117. L.T. Case No. 01-7497. Opinion filed November 30, 2005. Thus, the Court gave effect to the waiver in the retainer agreement.

If allowed to stand, the consequences of this decision may be far reaching. The dissenting opinion notes the likely consequence if the Florida Supreme Court does not reverse the appellate court:

"This brings me to what I fear most about the change the majority has wrought today. That is that the waiver of the homestead exemption will become an everyday part of contract language for everything from the hiring of counsel to purchasing cellular telephone services. The average citizen, who is of course charged with reading the contracts he or she signs, as this court knows all too well, often fails to read or understand boilerplate language detailed in consumer purchase contracts, language which the contracts themselves often permit to be modified upon no more than notification in a monthly statement or bill. Nonetheless, under the majority's application of article X, section 4, such consumers may lose their homes because of a "voluntary divestiture" of their homestead rights for nothing more than failure to pay a telephone bill. This inevitably will result in whittling away this century old constitutional exemption until it becomes little more than a distant memory."

Seeing how the appellate court has effectively overidden Supreme Court precedent (something which is not supposed to happen, at least without good cause), we can probably expect an appeal to the Supreme Court - thus, the last word on this issue has probably not yet been heard.