The Texas Homestead is a shield, granted under both the Texas constitution and legal code, for homeowners to prevent creditors from taking a person’s home to satisfy a debt obligation.
Out of all the states in the union, Texas’s homestead protections give homeowners the broadest shield from creditors across the board.
The home is a sacred place in Texas, going back to the earliest times when it was only a territory. One of the earliest inducements Texas had in the 19th Century was providing homestead protections to bring settlers to the state. If everything is bigger in Texas, the Texas homestead is easily the most significant shield in the United States.
This article is going to walk through the history, legal specifics, and how-to of establishing a Texas homestead to get all the protections that right provides. Once armed with this knowledge, a homeowner or debtor can sleep soundly knowing that they’ve maximized as much of the homestead protections in Texas that law provides.
What is the Texas Homestead?
Let’s start at the 30,000-foot view and get a big picture. The Texas Homestead makes a person’s home, in the state of Texas, a castle under law. It protects against most third-party creditors from being able to seize a house — the homestead — and use that to fulfill a debt obligation. The home includes both the physical building of the house as well as the land where the homestead sits.
Texas provides broad definitions of homesteads under both the state constitution and the statutory code that’s developed since the Texas constitution got ratified. 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.
That’s the big picture view of the Texas homestead. It’s a legal right to protect your home, the property it sits on, and more.
Who can get the Texas homestead?
Anyone who moves to Texas is eligible to receive the homestead right. All you have to do is secure the essential legal factors that establish a homestead, and Texas recognizes a homestead. In a nutshell, those factors boil down to proving an intent to create a homestead and filing paperwork with the county clerk to establish the homestead. It’s a relatively painless process.
Beyond the home, what else does the homestead protect?
A home is more than just a building, and you often need things that are part of the property to make day-to-day life possible. Texas agrees, which is why they built upon the constitutional foundation of the homestead and have included a long list of personal property that gets protected as part of the estate.
Texas Property Code chapter 42 provides a quick list of some of the personal properties included. Other classes of property get protection as well, which we cover in the piece, “13 Creditor Protected Assets in Texas.” But a quick list of personal property includes:
- home furnishings, including family heirlooms;
- provisions for consumption;
- farming or ranching vehicles and implements;
- tools, equipment, books, and apparatus, including boats and motor vehicles used in a trade or profession;
- wearing apparel;
- jewelry (not to exceed 25 percent of the statutory aggregate limitations)
- two firearms;
- athletic and sporting equipment, including bicycles;
- a two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of a family or single adult who holds a driver’s license or who does not hold a driver’s license but who relies on another person to operate the vehicle for the benefit of the nonlicensed person;
- the following animals and forage on hand for their consumption:
- two horses, mules, or donkeys and a saddle, blanket, and bridle for each;
- 12 head of cattle;
- 60 head of other types of livestock; and
- 120 fowl; and
- household pets.
When you combine the broad protections of the Texas homestead with the statutory protections the Texas legislature has provided, you can see why Texas is chief among states for those with debt obligations. As one attorney in this specialty has commented:
It is quite possible to make a good salary (no monetary limit), own a paid-for million dollar home, drive a paid-for car, have numerous judgments against you (from Texas or other states), and be reasonably secure from creditors-although dealings in current cash accounts may be severely restricted.
With this overview in mind, we can now move towards specifics. What are the details of the Texas Homestead right, how to establish it, and other topics.
The Texas homestead is a constitutional right for everyone
Texas has a long history of the homestead exemption right, going back to its founding. Before Texas was a state the need for a broad homestead right was seen, “many Americans who settled in Texas in the early nineteenth century were pursued by their creditors, and for their protection, Stephen F. Austin,” who was the founder of Texas, “recommended a moratorium on the collection of the colonists’ foreign debts.” The very first act was from the legislature of Coahuila and Texas, which exempted certain lands from creditor claims.
The modern version of the Texas homestead came to fruition in the Texas constitution of 1876 and has gotten amended over time to include even more. Texas has generally made it a point to ratchet up protection from creditors with regards to the homestead, not down.
The Texas Constitution lists out the homestead exemption in Article 16, Sections 50-52. The critical portion is the first part of section 50, which states:
The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for…”
That broad language is explicit in its protection. Unless the creditor falls under one of the caveats listed after “except for,” they get prohibited from taking the homestead for the payment of any debt. Because of that broad language, the courts have always given a liberal construction to the constitution and statutes to protect the homestead rights. Sanchez, 960 S.W.2d at 769 (Tex. App. 1997). The reason for that is because homestead rights have their origin in constitutional and statutory provisions and not in the common law; courts can tinker with the common law, they’re not inclined to do the same with a constitutional right with a robust legal history backing it. Gann v. Montgomery, 210 S.W.2d 255, 257-58 (Tex. App. 1948).
Texas explicitly designed this constitutional right to shield debtors and homeowners from creditors.
The Texas courts have spelled out that they understand that the constitutional provision helps debtors avoid creditors. Texas courts have pointed out that this is the point of the law. The primary goal of the Texas homestead exemption is to protect the individual, family, and their ability to make a living:
“Undoubtedly the purpose of the homestead exemption is to shield from creditors a place for the family to live and a place for the head of the family to exercise his calling or business to enable him to support the family. It was contemplated that a rural homestead would serve both purposes, and, therefore, no separate provision was made for a residence and a business homestead, although it was permitted that the homestead consist of separate and detached parts, if used for the purposes of a home. As to the urban homestead, it was not contemplated that the exemption of a place of residence would be sufficient as the exemption of a place to exercise the calling or business of the head of the family. Hence a separate provision was made for each.” In re Perry, 345 F.3d 303 (5th Cir. 2003).
And the courts read this protection broadly. “Indeed, a court must uphold and enforce the Texas homestead laws even though in so doing the court might unwittingly assist a dishonest debtor in wrongfully defeating his creditor.” PaineWebber, Inc. v. Murray, 260 B.R. 815, 822 (E.D. Tex. 2001). The point is protecting the individual, and the homestead, not the creditor.
Transferring homestead right to a corporation can extinguish the right
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. Nash v. Conatser, 410 S.W.2d 512, 521-22 (Tex. Civ. App. 1966).
The homestead exemption extends only as far as the person has an interest in the property
One of the well-settled areas of homestead exemption rights is that “one’s homestead right in property can never rise any higher than the right, title, or interest that he owns in the property attempted to be impressed with a homestead right.” If the ownership of the property extends to multiple people, the right only extends as far as that property interest.
As an example, “while one tenant in common may acquire homestead rights in the common property, the rights so acquired are not superior to the rights and remedies of the other joint owners. He can acquire no such rights as will prejudice or in anywise interfere with the rights of the other tenants in common.” Sayers v. Pyland, 139 Tex. 57, 161 S.W.2d 769, 773 (Tex. 1942).
How many homesteads can a person own?
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. ). In re Montgomery, 80 B.R. 385 (Bankr. W.D. Tex. 1987). We’ll return to the urban versus rural distinction later.
This fact remains true even in a divorce proceeding when a family unit consisting of a husband and wife gets divorced, and they move to two different homes. “The homestead of a family consisting only of husband and wife is terminated by divorce irrespective of intention or occupancy. Since there is no family thereafter, there can be no homestead exemption under Texas law.” Tanton v. State National Bank of El Paso, 79 S.W.2d 833 (1935). However, the exemption does protect a constituent unit of the family which remains in the home after the divorce. Woods v. Alvarado State Bank, 19 S.W.2d 35(1929).
The point is a family, or an individual only has a claim to one homestead. If there is more than one possibility on the homestead, the court will look to find the main homestead of the family because “the protection of the family [is] the purpose of the exemption.” Burk Royalty Company v. Riley, 475 S.W.2d 566 (Tex. 1972).
How do you assert the Texas Homestead constitutional right?
The most basic of all ways to obtain the homestead right is to purchase a property and start living there, using it as a homestead, either as an individual or family. As the courts have said, “generally, in order to assert homestead rights in a particular property, a person must use the property as a home.” Yates v. Home Bldg. & Loan Co., 103 S.W.2d 1081, 1084-85 (Tex.Civ.App.-Beaumont 1937). As Texas courts have reiterated, “the purpose of homestead exemption laws is to protect the possession and enjoyment of the individual in [the] property which is used as his or her home.” Hillock Homes, Inc. v. Claflin, 761 F.2d 1088 (1985).
But for a variety of reasons, sometimes that exact situation cannot happen immediately, and courts have said that intent to occupy is not enough to establish a homestead. “Homestead rights in a house cannot be acquired by mere intention, but to effectuate the intent actual use of the property as a home must concur.” In re Harwood, 404 B.R. 366 (Bankr. E.D. Tex. 2009).
To establish homestead rights, the claimant must show a combination of both overt acts of homestead usage and the intention on the part of the owner to claim the land as a homestead. 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. Clark v. Salinas, 626 S.W.2d 118 (Tex. App. 1981).
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. In re Huizar, 71 B.R. 826 (Bankr. W.D. Tex. 1987).
It must always be remembered that mere ownership alone is insufficient to constitute premises of a homestead. Silvers v. Welch, 91 S.W.2d 686, 688 (1936); that merely residing in a house over a length of time alone does not convert it into a homestead, Hilliard v. Home Builders Supply Co., 399 S.W.2d 198, 201 (Tex.Civ.App.Fort Worth 1966). Possession and use of land by one who owns it and who resides upon it makes it the homestead in law and in fact. NCNB Texas Nat. Bank v. Carpenter, 849 S.W.2d 875, 880 (Tex. App. 1993).
How can I voluntarily designate a homestead?
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. Texas Property Code 42.005(c) provides for the voluntary designation of a homestead and states:
- (c) …[T]o designate property as a homestead, a person or persons, as applicable, must make the designation in an instrument that is signed and acknowledged or proved in the manner required for the recording of other instruments. The person or persons must file the designation with the county clerk of the county in which all or part of the property is located. The clerk shall record the designation in the county deed records. The designation must contain:
- (1) a description sufficient to identify the property designated;
- (2) a statement by the person or persons who executed the instrument that the property is designated as the homestead of the person’s family or as the homestead of a single adult person not otherwise entitled to a homestead;
- (3) the name of the current record title holder of the property; and
- (4) for a rural homestead, the number of acres designated and, if there is more than one survey, the number of acres in each.
In a nutshell, what the statute is providing for is that a person files an affidavit with the county clerk claiming a homestead. Some mortgage companies provide example forms, 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.
Another way to establish a homestead is to seek homestead tax exemptions provided by Texas. The Texas Comptroller office provides forms and instructions on how to file for and receive school, county, age, and other tax exemptions.
When does the court determine when a homestead get established?
In determining whether the property obtains the homestead exemption status, courts consider the law and facts as they existed on the date a debtor filed for bankruptcy. White v. Stump, 266 U.S. 310, 313 (1924). This concept is otherwise known as the snap-shot rule. The courts have ruled, “the Petition Date is the operative date in determining whether a homestead is exempt, and a homestead owned on the date of bankruptcy filing is “subject to an unconditional exemption under Texas law.” In re DeBerry, 884 F.3d at 529, 530 5th Cir. 2018).
What kind of Texas homestead can a person declare?
Broadly speaking, Texas delineates between two kinds of homestead: urban and rural. The distinction is located in the Texas Property Code Chapter 41.002. A homeowner can have either an urban or a rural homestead, but not both. There is only one statutory test for whether or not the property is eligible for an urban homestead if the property fails that test, it reverts automatically to a rural homestead.
The full statutory test is as follows, in chapter 41.002:
- (a) If used for the purposes of an urban home or as both an urban home and a place to exercise a calling or business, the homestead of a family or a single, adult person, not otherwise entitled to a homestead, shall consist of not more than 10 acres of land which may be in one or more contiguous lots, together with any improvements thereon.
- (b) If used for the purposes of a rural home, the homestead shall consist of:
- (1) for a family, not more than 200 acres, which may be in one or more parcels, with the improvements thereon; or
- (2) for a single, adult person, not otherwise entitled to a homestead, not more than 100 acres, which may be in one or more parcels, with the improvements thereon.
- (c) A homestead is considered to be urban if, at the time the designation is made, the property is:
- (1) located within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision; and
- (2) served by police protection, paid or volunteer fire protection, and at least three of the following services provided by a municipality or under contract to a municipality:
- (A) electric;
- (B) natural gas;
- (C) sewer;
- (D) storm sewer; and
- (E) water.
- (d) The definition of a homestead as provided in this section applies to all homesteads in this state whenever created.
Urban homesteads are capped at ten contiguous acres of land, while rural can expand out to 100 acres of non-contiguous lots for an individual and 200 acres for a family. When a rural homestead is established, the rural designation remains with the property even if urban conditions develop around it over time.
What is the difference between family and individual for the Texas Homestead?
The two main distinctions in homestead exemptions are between rural versus urban, covered above, and family versus the individual. “For over a century, within the context of homestead law, Texas courts have held that the family relation is one of status; that the head of the family must be legally or morally obligated to support at least one other family member; and additionally, there must be a corresponding dependence on the other member for this support.” Henry S. Miller Company v. Shoaf, 434 S.W.2d 243 (Tex. App. 1968).
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. In re Hill, 972 F.2d 116 (5th Cir.1992).
As an example, an unmarried man was receiving social security income of $800.00 a month and living in a home. At one point, his adult daughter and her son moved in with him. They all claimed they depended on his social security support and the house as a family to survive. The court took these factors together, construing the law and rights involved liberally, and granted the homestead family right to these people. That, in turn, shifted them from an individual, rural homestead right of only 100 acres to a family rural homestead right of 200 acres, which covered the entirety of the 165 acres estate in question. Duran v. Henderson, 71 S.W.3d 833 (Tex. App. 2002).
For a married couple, the homestead exemption may attach either to community property or to the separate property of either spouse. Crowder v. Union Nat’l Bank of Houston, 261 S.W. 375, 377 (Tex. 1924). But remember, as previously stated, a family is entitled to only one homestead, so a husband and wife cannot claim separate homesteads. “It is possible for one spouse to abandon the homestead and his corresponding rights while the other spouse retains her homestead rights.” Fairfield Fin. Group, Inc. v. Synnott, 300 S.W.3d 316, 321 (Tex. App. 2009). The party in a marriage asserting abandonment must plead and prove it by competent evidence. Sullivan v. Barnett, 471 S.W.2d 39, 43 (Tex. 1971).
In a family homestead, as long as real property is a family homestead by virtue of one spouse’s intention and use, that property is protected by the homestead exemption, unless abandonment is pleaded and proved. Denmon v. Atlas Leasing, LLC, 285 S.W.3d 591 (Tex. App. 2009). Finally, it’s possible for a family homestead to exist while one spouse uses the home, and the other spouse lives apart. Salomon v. Lesay, 369 S.W.3d 540 (Tex. App. 2012).
What are the homestead rights for a surviving spouse?
Texas Estates Code covers situations in which one spouse dies in a family. The two relevant provisions for our purposes are Chapter 102.002, which says:
The homestead rights and the respective interests of the surviving spouse and children of a decedent are the same whether the homestead was the decedent’s separate property or was community property between the surviving spouse and the decedent.
That statute ensures homestead rights travel according to standard property and probate laws. As does Chapter 102.003, which says, “The homestead of a decedent who dies leaving a surviving spouse descends and vests on the decedent’s death in the same manner as other real property of the decedent and is governed by the same laws of descent and distribution.”
A surviving spouse retains the right to use and occupy the homestead so long as he or she elects to do so. This right continues as long as the surviving spouse uses or occupies the property, or until he or she abandons that right. Further, the surviving spouse’s right exists even if the decedent has willed the property to another. Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148 (Tex. App. 1995).
The homestead right may be waived. A waiver is defined as an intentional relinquishment of a known right. The key element to waiver is intent. The intent to waive may be either expressly made or inferred from intentional conduct that is inconsistent with an intent to claim the right. Once it attaches, the homestead right is presumed to continue, and one asserting waiver must plead it and prove it by affirmative evidence. That burden is a “heavy” one. To establish waiver, there must be proof of “clear, unequivocal, and decisive acts,” showing an intent to waive. Ferguson v. Ferguson, 111 S.W.3d 589 (Tex. App. 2003).
What are the caveats and limitations to the Texas Homestead right?
The first significant limitation to the Texas homestead is that it is a state right, not a federal one. That means federal agencies like the Internal Revenue Service (IRS) can seize and sell your home to fulfill a debt. The IRS does not have an unlimited right to take and must follow specific rules. If the IRS competes with other creditors, they can use the Texas homestead to shut those creditors out so that their creditor claim is superior to others.
Texas constitution limits on the homestead right
The Texas constitution lists several restrictions on the homestead right. Not all debts get barred from collecting on a house. The Texas constitution’s places several caveats on these areas, and the Texas property code chapter 41.001summarizes them as follows:
- (a) 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.
- (b) Encumbrances may be properly fixed on homestead property for:
- (1) purchase money;
- (2) taxes on the property;
- (3) work and material used in constructing improvements on the property if contracted for in writing as provided by Sections 53.254(a), (b), and (c);
- (4) an owelty of partition imposed against the entirety of the property by a court order or by a written agreement of the parties to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding;
- (5) the refinance of a lien against a homestead, including a federal tax lien resulting from the tax debt of both spouses, if the homestead is a family homestead, or from the tax debt of the owner;
- (6) an extension of credit that meets the requirements of Section 50(a)(6), Article XVI, Texas Constitution; or
- (7) a reverse mortgage that meets the requirements of Sections 50(k)-(p), Article XVI, Texas Constitution
- (c) The homestead claimant’s proceeds of a sale of a homestead are not subject to seizure for a creditor’s claim for six months after the date of sale.
Finally, one last limitation on the homestead right comes from Home Owner’s Associations (HOA’s) and Condominium Owner Associations (COA’s). If you live in a neighborhood that has either an HOA or COA, you are more than likely required to pay dues to that organization. If you do not pay the dues for those organizations, they can place a lien on the property that is not prohibited from seizure under the Texas Homestead exemption right in the constitution.
The critical case here is Inwood North Homeowners’ Ass’n, Inc. v. Harris, 736 S.W.2d 632 (Tex. 1987). Decided in 1987, and the Texas Attorney General reiterated the standing of the case in 2004, allows for HOA’s and COA’s to foreclose on a property if behind on fees for these groups, no matter the size. Texas does provide a limited right of redemption for homeowners, to repurchase the house after an HOA or COA foreclosure.
Does the Texas Homestead right cover oil, gas, or mineral rights?
Yes. Under Texas law, oil and gas in place are realty and become personalty when severed from the land by production. Royalty (which is payable to the owner of the minerals), oil payments and bonus payments are interests in realty because such rights represent interests in the oil and gas still in place on the property. Phillips Petroleum Co. v. Adams, 513 F.2d 355, 363 (5th Cir. 1975). Homestead protections extend to and include mineral interests that are located under the homestead.
For this reason, both spouses must join in signing oil and gas leases. Gulf Production Co. v. Continental Oil Co., 132 S.W.2d 553 (Tex. 1939). Royalties from a mineral lease of the homestead are exempt from a turnover order since they are derived from the underlying exempt homestead. Fitzgerald v. Cadle Company, No. 12-16-00338-CV (Tex.App.-Tyler 2017).
The Texas homestead right is a powerful legal tool to exercise, protecting the home, the property it sits on, personal property on it, and any oil, gas, or minerals underneath the ground. Establishing the Texas homestead exemption should be of paramount importance for any homeowner in the state of Texas.
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