Homestead Exemption Lost By Leasing Land To Mobile Home

There are several bankruptcy court decisions which considered the debtor’s homestead exemption when the debtor used part of the homestead property to produce income. The general rule is that commercial uses on a homestead property situated within a municipality will disqualify all or part of homestead exemption, but income producing activity does not disqualify homesteads located in the county.

A recent bankruptcy decision considered a debtor who subdivided a homestead property in the county. The debtor lived on one parcel and rented a mobile home on the other parcel to an unrelated third party. Notwithstanding the allowance of commercial activity on county homestead property, the bankruptcy court disallowed this particular debtor’s protection of the subdivided parcel upon which the rented mobile home is located.

The court reasoned that homestead requires occupancy of the owner and/or the owners family. Because the second parcel was rented to an unrelated third party the property no longer qualified as homestead. Commercial use of a homestead in the county is acceptable provided that the activity involves use of the property by the owner and family.

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