Many readers of BackerReport are likely aware that the Florida Constitution governs homestead property (one’s permanent residence) in several distinct ways: protecting it from forced sale by creditors; restricting its alienation and devise; exempting it from certain ad valorem taxes; and imposing a 3% cap on annual assessment increases (through the Save Our Homes amendment).
A previously unanswered legal question involved whether a taxing authority had the ability to tax a portion of a property where the owner resides as homestead while taxing the balance as non-homestead when that portion is used for something unrelated to the owner’s residence. Both a Florida trial court in Sarasota County and the Florida Second District Court of Appeal held that, if a part of an owner’s home is used as the owner’s primary residence, the law requires the County to tax the whole property as homestead. The Florida Supreme Court disagreed in Furst v. Rebholz, 48 Fla. L. Weekly S43, and held that taxing authorities have a right to tax a portion of an owner’s residence as homestead and the portion of the same property which is not used as the owner’s residence as non-homestead.
Rod Rebholz had what was considered by Sarasota County’s Property Appraiser a “single family residence,” but Mr. Rebholz lived only on the lower level and rented out the second level to a number of different tenants. The Supreme Court concluded that his use was basically a “boarding house.”
The homestead tax exemption is set out in article VII, section 6(a) of the Florida Constitution. In relevant part, it says: “Every person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, or another legally or naturally dependent upon the owner, shall be exempt from taxation thereon, [up to specified amounts].” The Florida Supreme Court pointed out that there are two components to the homestead tax exemption: ownership and residency.
When a property appraiser determines that a person has improperly received a homestead tax exemption or Save Our Homes benefit, Florida law requires the property appraiser to impose the additional taxes that would have been due for up to the preceding ten years, plus a penalty and interest. In Mr. Rebholz's case, the revocation of the homestead exemption as to 15% of the total property had the effect of removing the Save Our Homes benefit from that limited portion of Rebholz's property. The property appraiser therefore recalculated Rebholz's taxes for tax years 2004 through 2013, applying to the non-homestead portion a 10% annual assessment increase cap (instead of the 3% Save Our Homes cap). The result was that Rebholz owed approximately $7,000 in back taxes, penalties, and interest. He paid the tax lien but then sued the property appraiser, the tax collector, and the state Department of Revenue for a refund and a reinstatement of homestead status to the entire property.
The Supreme Court’s analysis of various portions of the law included questioning how Mr. Rebholz’s use of his home differs from one who owns an apartment building and resides in one of the units. The Court gave no weight to the characterization by the County of his home as a “single family residence” since the Court concluded that such a label did not accurately describe the design and use of his property. On this issue, the Court held “The point is not to quibble over labels. Under the constitutional and statutory scheme, how an owner uses a property—not its physical structure or what it is called—dictates the availability of the homestead tax exemption.
This case will likely give rise to an effort by Florida Counties to reevaluate those properties that it learns are only a part of the property is used as the owner’s homestead. Homeowners should seek counsel from their attorneys if their tax category is challenged.
