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All pretended sales of the homestead involving any condition of defeasance shall be void. The Texas Comptroller office provides forms and instructions on how to file for and receive school, county, age, and other tax exemptions. Aside from the Texas courts trying to determine whether or not someone has established a homestead, the Texas legislature has provided a way for people to establish a homestead via voluntary designation. As an example, one person purchased his new home and began renovating it, but had not moved into it yet. He was in the process of moving from one property to another was performing extensive renovations. The court held that because the debtor had spent $12,000 – $15,000 in renovating the house, and vacated the property, he was previously renting, that these factors together established a new homestead at the renovated home.
A homestead can be rural or urban, with a house of nearly any side, and property that can extend upwards of 100 acres for a single person, and 200 acres for a family. Statutes and case law have grown to include many personal property implements and fixtures on the homestead land. When you combine overarching homestead protections with the prohibitions against wage garnishment in Texas, you get a clear picture of how hard it is for a third-party creditor to dismantle a person’s life.
Texas Homestead Law
A homestead and one or more lots used for a place of burial of the dead are exempt from seizure for the claims of creditors except for encumbrances properly fixed on homestead property. Because the homestead right is individual and specific to the person, an individual or family can only have one designated homestead. If a person owns multiple tracts of land, they must identify one of those tracts as the homestead, if in an urban homestead situation. A rural homestead may include multiple non-contiguous tracts, as long as they are all designated under the main homestead.
Since the issue had already been decided in Priester, the Fifth Circuit denied review of the Morans’ case because internal circuit rules do not allow it to revisit a decision. She would discover this firsthand while representing the homeowners in Moran v. Ocwen Loan Servicing, which moved from state court to federal district court to the Fifth Circuit. Since 1997, a home equity loan has been impermissible on property designated for agricultural use unless the property was used primarily for the production of milk.
A Look Inside Texas' New Home Equity Loan Law
If you want to get another loan, you’ll have to pay the first one off first. Remember how we said these laws prevent consumers from taking on undue risk? One big part of this is limiting the amount of home equity that a person can borrow against. So, for example, if you have a home that is worth $200,000, and you don’t have a mortgage (you have paid off 100% of your home), the largest home equity loan that you could obtain would be 80% of the value, or $160,000. Unlike other states, Texas didn’t allow home equity loans until 1997.
Texas explicitly designed this constitutional right to shield debtors and homeowners from creditors. Information in this article is provided for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. No attorney-client relationship is created by the offering of this article. This firm does not represent you unless and until it is expressly retained in writing to do so. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well, since we do not give tax advice.
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As do some cities in Texas, for purchasers seeking homestead protections, and any homebuyer seeking such protections should ask their attorney or real estate agent for help in filing a homestead affidavit. On a separate but important issue, division of community property is not abandonment when it comes to the homestead exemption. When a couple divorces and one spouse moves out and conveys his or her interest to the other, the homestead endures so long as the resident spouse remains. A judgment lien against the departing spouse does not attach to the property because the resident spouse’s homestead interest is undivided and unaffected. Hankins v. Harris, 500 S.W.3d 140 (Tex.App.-Houston [1st Dist.] 2016, no pet.). Asset protection planning in Texas relies on constitutional and statutory homestead protections plus formation of an LLC (or a two-LLC or hub-sub structure) for investments, with the goal of utilizing anonymity techniques whenever feasible.
The homestead right is unique and personal to the individual or family. And although that individual can operate a business on the homestead, one cannot transfer the homestead right over to a company. When a homestead gets conveyed to a corporation, the stock of which is owned by the grantors, the property loses its homestead character regardless of whether the grantors continue to occupy the property. The valid title then vests in the corporation and the property becomes subject to the debts of the corporation. In order to establish a rural homestead, you must reside on the property and use all the remaining property to support your family. If you have a multi-parcel rural homestead, you only need to reside on one parcel.
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Code §41.002; Majeski v. Estate of Majeski, 163 S.W.3d 102 (Tex. App.-Austin 2005, no pet.). Neither the constitution nor the Property Code provides for the overlapping use of a rural homestead as a business, but this may be compensated for by the larger acreage allowance for rural properties . §41.002; Riley v. Riley, 972 S.W.2d 149 (Tex.App.-Texarkana 1998, no pet.). A homestead claim must also be based on a real property interest. For instance, neither a mobile home unaffixed to the realty nor a boat qualify.
An urban homestead may be a home or a place of business, or both. There is no limit to the value of urban or rural homesteads, only to their size. Rural homesteads are limited to 200 acres for a family and 100 acres for a single adult, including improvements on the property. An urban homestead is limited to ten acres with improvements, which must be in adjacent lots.
Finally, it’s possible for a family homestead to exist while one spouse uses the home, and the other spouse lives apart. A family can be as small as a husband and wife or may include a parent and his or her adult child, provided that the parent is under an obligation to support the adult child and the child is dependent on the parent for support. For a rural homestead, the number of acres designated and, if there is more than one survey, the number of acres in each. Gregory v. Sunbelt Sav., F.S.B. 835 S.W.2d 155 (Tex. App. 1992). Absent actual occupancy, some overt act of preparation is required to establish a homestead right to corroborate the claimant’s testimony that he intended to occupy the property as his homestead.
Your interest rate should be clear and understood when you close. The lender can’t require the borrower to apply loan proceeds toward other debts not tied to the home equity. Lastly, it’s important to know your rights when it comes to closing and repaying your home equity loan.
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