For many years, one of the most unsettled areas of Mass. real estate law was the meaning and application of the homestead protections offered by statute (Mass. General Laws. Ch. 188). Simply stated, the Homestead statute is intended to protect the equity a homeowner enjoys in his/her/their home from claims by unsecured creditors up to a statutorily established amount (the current upper threshold is $500,000.00). However, the previous statute left several open questions regarding this protection such as: “Can both a husband and a wife declare a homestead?”, “What happens if both sign and record homestead declarations?”, “Does the protection only apply to married couples?”, “What happens to the homestead if a mortgage is recorded subsequent to the recording of a declaration?”, “Some states provide for automatic protection- why doesn’t Massachusetts?”
With the recent amendment to Chapter 188 by the Legislature, these questions are largely addressed. For one, homestead protection is offered to any owner (or owners) of a home or by someone who possesses real estate by lease and who occupies the property as their principal residence. This includes both traditional forms of ownership, (joint or single owner) as well as that held in trust if the trust property is the principal residence of the beneficiaries. In the case of joint ownership, both joint owners of a property may file separate homestead declarations, but the protection is capped at $500,000.00 (the protection doesn’t double as a result of the double filing). Provision is also made for elderly or disabled individuals, regardless of marital status, as well as for owners of manufactured homes. In an anomalous provision, elderly or disabled declarants may each file homestead declarations, and in that case, the protection is doubled in that each declarant receives $500,000.00 in homestead protections.
Mortgages executed after the declaration of a homestead are granted priority over the existing homestead, but the homestead otherwise remains effective (previously, there had been a questions as to whether the execution and recording of a subsequent mortgage terminated the Homestead).
In Massachusetts, homestead protection of up to $125,000.00 is automatic, in that no formal filing is required. In order to take advantage of the statutory provision allowing homestead protection of up to $500,000.00, a formal Declaration of Homestead must be signed and recorded in the registry district having jurisdiction over the real estate. The revised statute also outlines the ways in which a homestead may be terminated, including but not limited to a cessation of the use of the property as a principal residence.
A new requirement also became effective under the revised statute, requiring attorneys closing a mortgage transaction to provide notice to the mortgagor of the right to declare a homestead, together with an explanation of the difference between the automatic homestead and the declared homestead.
It is hoped that with these changes and clarifications homestead protection will become more accessible to the average homeowner. If you have more than $125,000.00 in equity in your principal residence, you should take advantage of this inexpensive form of protection for yourself and your family by contacting an attorney and making the necessary filing with the registry of deeds.
Any questions regarding Massachusetts Homestead Law can be directed to Attorney Michael Gatlin.