New Massachusetts Homestead Act Increases Homeowner Protection
A homestead is a statutory exemption that protects a principal residence against the rights of creditors. This means that a homeowner who owes money for a debt has some protection against losing his home to a creditor.
In March 2011, the Massachusetts legislature enacted a new law that provides greater protection for every Massachusetts homeowner by providing an automatic homestead in the amount of $125,000.00 and “declared” homesteads that provide protection up to $500,000.00.
The following is a summary of the highlights of the amended bill:
All Massachusetts homeowners receive an automatic homestead exemption of $125,000 regardless of whether or not a Declaration of Homestead is filed with the Registry of Deeds.
All Massachusetts homeowners are eligible for a $500,000 “declared homestead exemption” by filing a declaration of homestead at the Registry of Deeds. For married couples, both spouses will now have to sign the form, which is a change from prior practice.
If you have already have a homestead recorded at the registry of deeds, you do not have to re-file it. You are automatically entitled to the full $500,000 protection.
Homesteads are now available on 2-4 family homes, and for homes in trust.
The existing “elderly and disabled” homestead will remain available at $500,000.
If you have a homestead as a single person, and get married, the homestead automatically protects your new spouse. Homesteads now pass on to the surviving spouse and children who live in the home.
Homestead protection is now available for homes kept in trusts
Homestead protection is now available for manufactured homes
You do not have to re-file a homestead after a refinance. In the past, lenders often required homeowners to either subordinate or release homesteads. Under the new law, homesteads are automatically subordinate to mortgages, and lenders are specifically prohibited from having borrowers waive or release a homestead. (Note however, that those homeowners who have refinanced a mortgage in the last several years should consider recording a new homestead declaration since many refinancing mortgages contained a waiver of homestead rights.)
Closing attorneys in mortgage transactions must now provide borrowers with a notice of availability of a homestead.
Cautionary Note: A homestead does not prevent a creditor from attaching a home in every situation. For example, if a homeowner causes an automobile accident while driving, is sued for $1,000.000.00. and the damages exceed the amount of available auto insurance, the accident victim may obtain an attachment of the driver’s home. Without homestead protection, the victim could force a sale of the home to get the equity in the house. However, with the homestead, while the accident victim could still force a sale of the house, the first $500,000.00 in equity (or $125,000.00 if there is only the automatic homestead)) goes to the homeowner and not the victim. This means that the victim won’t force a house sale unless the homeowner has more than $500,000.00 in equity in the home.
With the enhanced protections, every homeowner should take advantage of the homestead law and file a declaration of homestead to take advantage of the full $500,000.00 protection.
To view the complete text of the new law, click on the following link:
If you have further questions or would like to have a Declaration n of Homestead prepared, please contact us at The Law Offices of Harold D. Levine, at (617)232-7222 or at www.haroldlevinelaw.com
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