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Thursday, February 23, 2006


A Florida homestead enjoys significant constitutional protections against creditors of the owner. In Havoco of America, Ltd. v. Hill, 790 So. 2d 1018 (Fla. 2001), the Florida Supreme Court indicated that when funds obtained through fraud or egregious conduct are used to invest in, purchase, or improve the homestead, the homestead protection will not apply.

What happens if an owner transfers funds into a homestead by paying down a mortgage if that transfer constitutes a fraudulent conveyance - does this allow a creditor to reach the homestead? A "fraudulent conveyance" is a transfer that puts funds or assets beyond the reach of present or future creditors in a manner that applicable statutes or the common law provides will not be respected.

In Willis, Willis and Giacomino v. Red Reef, Inc., 4th DCA (2006), Florida’s Fourth District Court of Appeals addressed the issue whether a mere fraudulent conveyance into a homestead is the type of fraud that will expose the homestead to the owner’s creditors. Reversing the trial court, the appellate court held that a fraudulent conveyance is NOT the type of fraud that the Florida Supreme Court was concerned with. An important distinction noted by the court was that the owner did not obtain the funds that went into the homestead by fraud or egregious conduct - merely transferring the funds into the homestead via a fraudulent conveyance is not sufficient to give rise to an enforceable equitable lien.

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