Author’s Note: While these articles are not meant to contain legal advice, the author acknowledges the assistance of Paul Carey, Esq.
Let’s start by describing what homestead protection is not. It is not homesteading, a program which granted Federal lands to 500,000 families between 1862 and 1986. It is also not a homeowner’s property tax exemption which gives a $7,000 reduction in value (about $71 in tax savings) to persons who own and occupy their principal residence and who claim the exemption on a form supplied by the Napa County Assessor’s office
Types of Protection
Homestead protection is set forth in the California Constitution: “The Legislature shall protect, by law, from forced sale a certain portion of the homestead and other property of all heads of families.”
There are three types of homestead protection; a declaration of homestead, a probate homestead, and a residential exemption. The first two require action by the property owner or by a judge while the residential exemption is granted by statute and applies in most cases where there is not a declared homestead.
The residential exemption exempts the homestead property from forced sale by a creditor enforcing a judgment against the debtor/property owner if the sale will not produce sufficient proceeds to satisfy liens against the property and still leave the debtor with the amount of the homestead exemption. Let’s assume the homestead exemption, which is set forth in the California Code of Civil Procedure and adjusted by the Legislature from time to time to account for inflation, is $50,000 and the home has a mortgage of $150,000 and the creditor has a judgment for $35,000 which totals $235,000. If the market value of the home is $225,000, the residential exemption would prevent the creditor from forcing the sale of the home since the proceeds of the sale would be less than the combined amounts of the mortgage, the homestead exemption, and the judgment.
The Declared Homestead is a form that is recorded with the Recorder in the County where the homestead property is located. The primary difference between the statutory residential exemption and the declared homestead is that the former applies only to involuntary sales (forced by a creditor), while the latter also applies to a voluntary sale. The declared homestead protects a declarant’s equity up to the homestead limit when selling the home voluntarily for relocation or other reasons. The statutory and declared exemptions are mutually exclusive so property owners need to understand the consequences of declaring a homestead on their property instead of relying on the residential exemption.
A judge can also create a probate homestead for a surviving spouse or minor children which has many of the same protections as the declaration of homestead.
Information on the homestead declaration form and filing requirements can be obtained at the reference desk at your local library. However, as in most matters pertaining to property ownership, homestead protection is a complex topic and usually requires the assistance of a legal or financial advisor.
Should you have any questions please contact Napa County Assessor-Recorder-County Clerk John Tuteur at 707.253.4459 or by emailing John Tuteur.
More articles can be found on the Assessor's page.