The New Massachusetts Homestead Law Explained

by Gary Casaly, Esquire

Liens, if enforced, can result in ouster of the owner from his or her property. In this regard it is important to understand how homesteads can protect an owner’s possession and occupation of a home. Under Chapter 395 of the Acts of 2010 (effective as of March 16, 2011), a statute that entirely re-writes G.L.c. 188, three types of homesteads come into existence in Massachusetts. Two types – the “regular” homestead and the one for elderly/disabled persons 62 years of age or older – are familiar to conveyancers (although some of the rules concerning them have changed in the new law) while the third type — the “automatic” homestead — is entirely new. How these forms of homestead are created and what methods are available for extinguishing or subordinating them is the subject of this bulletin.

Declared Homesteads. The “regular” homestead and the one for elderly/disabled persons are both “declared” homesteads, created by the recording of a declaration of homestead. They are each in the amount of $500,000. The “regular” variety is sometimes called a “Section 3” homestead (a reference to §3 of Chapter 188 of the General Laws), while the homestead for elderly/disabled persons is designated a “Section 2” homestead. A Section 3 homestead protects the declarant and his/her family (a defined term in the statute) while a Section 2 homestead protects only the declarant (with a notable exception for continued benefit of the homestead in favor of a surviving spouse or a spouse to whom the declarant makes a conveyance, discussed below). The creation of these two types of homesteads is governed by Section 5 of the statute, which requires the following:

Section 2 of the new statute tracks some language that appeared in the old law. At one point the statute provides that the “estate of homestead” of the elderly/disabled person is protected against attachment, etc. An estate of homestead, of course, is a possessory estate, one that provides a place for a person to live. Later, the statute states that “an owner of a home” who qualifies to and does record a Section 2 declaration “shall . . . be eligible for protection of such ownership interest.” It seems that the statute, as was the apparent case in the prior version, is trying to make a distinction between, and to provide protection for both an “estate of homestead” and an “ownership interest.” That is, the possessory interest as well as the title to the property itself seems somehow to be protected.

Although it was rarely done it was possible under the prior law to create a homestead in the grantee in the deed of conveyance to him or her, but the new statute no longer permits this.

Although there was little doubt that such would be the case under the prior law, the new law specifically states that if an individual declares a homestead under Section 3 and then subsequently marries that the individual’s spouse will benefit from the homestead.

A very important sentence appears in the new law that addresses the question of the preservation of homestead rights in the case of a subsequent declaration of homestead. Under the prior law – and also under the new law – a subsequent homestead declaration on other property will terminate a prior homestead (a party can have only one homestead at a time) but the new law, although containing this provision nonetheless permits the new homestead on the same property to relate back to the time of the creation of the prior homestead. Here’s what the statute says:

Any subsequent recording of a declaration of homestead benefitting (i) a family member identified on a prior declaration on the same home; or (ii) the spouse of that person, without an intervening release, shall relate back to the filing date of the earliest recorded declaration, but the provisions of this chapter pursuant to which the later recorded declaration was made shall control the rights of a person identified in the later declaration.

This is important because it will preserve homestead rights if (i) a subsequent homestead in inadvertently made or (ii) an elderly or disabled owner who has a Section 3 homestead wants to acquire a Section 2 homestead without disrupting homestead protection.

Automatic Homesteads. An automatic homestead arises without any declaration upon the acquisition of a home occupied or intended to be occupied by the purchaser as his or her principal residence. It is in the amount of $125,000, so it is obvious that it is more advantageous to declare a homestead. If a declared homestead is created it will supersede the automatic one, but the statute is clear to state that the subsequent declared homestead “shall not terminate the automatic homestead exemption applicable to the period between the creation of the automatic homestead and the later recording of the declaration of homestead,” thus providing once again a relation back effect. Moreover, if the declared homestead is thereafter invalidated or terminated, the automatic homestead will be reinstated as of the date of its creation, thus preserving the protection originally acquired. Similarly, the statute provides that where a declared homestead exists on one property and a subsequent homestead is declared on another (thus terminating the first homestead) but the subsequent declaration is later invalidated, the prior declaration of homestead is not reinstated, but “the owner shall have the benefit of the provisions of Section 4 [the automatic homestead]” in the second property.

Termination, Release or Subordination of Homesteads. A homestead under Section 3 (“regular”) or Section 4 (automatic) will be terminated upon any of the following:

Deeds between spouses or from a trustee to a beneficiary will not terminate a homestead unless there is an express release in the instrument. And in the case of an elderly/disabled persons homestead if the declarant conveys to or is survived by a spouse who occupies or intends to occupy the property as a principal residence and who does not have the benefit of a homestead under Section 2 or 3 then that spouse will have the benefit of the previously recorded declaration as if such declaration had been recorded under Section 3, until the spouse becomes eligible for and declares a homestead under Section 2.

A homestead created under Section 3 (regular) or Section 4 (automatic) shall, at the time of the death or divorce of the person holding the estate of homestead continue for the benefit of the surviving spouse or the former spouse and minor children who occupy or intend to occupy the home as their principal residence.

Homestead Subordination to Mortgage. The release of a homestead with regard to the granting of mortgages is now handled differently in the new law. Under the old law if there was a spouse (titled or non-titled) he or she had to release the homestead either as a mortgagor (if he or she was in title) or by simply signing the mortgage (if non-titled). Now, in the case of mortgages, the participation of non-titled spouses is unnecessary:

An estate of homestead shall be subordinate to a mortgage encumbering the home executed by all the owners of the home. For the purposes of this chapter, a mortgage shall include an instrument granting a security interest in a manufactured home or cooperative housing unit. The subordination shall not require the signature of a spouse who is not an owner.

No statement that a homestead estate shall be subordinate to the mortgage shall be required in the mortgage instrument and nothing contained in a mortgage or any document executed in connection with the mortgage shall affect or be construed to create, modify or terminate a homestead estate, other than to subordinate it to the mortgage as aforesaid.

This provision clarifies a near universal misunderstanding as to the prior law. It was believed by many conveyancers that a release of homestead contained in a mortgage resulted in the homestead being terminated, and thus requiring a new declaration to re-create it. However, §6 of the old statute prevented this unwanted result, but some conveyancers apparently were unaware of this. With regard to mortgages and the release of homesteads, the statute gives this caution to lenders:

A mortgage lender shall not require or record a release of homestead in connection with the making and recording of as mortgage.

This provision will eliminate the somewhat frequent practice (probably based on uncertainty of the effect of a homestead release in a mortgage under prior law) of requiring or encouraging the recording of a new homestead after a refinance. Such a recording under the old statute and now even under the new statute where there is this intervening release, can have devastating effects.

Determining Who Must Release. When it comes to instruments other than mortgages how do we know whether there is a non-titled spouse who needs to sign or that there is no such non-titled spouse to be concerned with? (The statute provides that a non-title spouse must be identified in the declaration, but a divorce or death, followed by remarriage, would introduce a new non-titled spouse whose identity is not established by the record. Moreover, in the case of an “automatic” homestead the non-titled spouse is never the subject of identification as there is no declaration.) The statute provides a “safe harbor”:

A deed, release or mortgage containing a statement of the marital status of a grantor may be relied upon by a good faith purchaser for value, As to acts undertaken in good faith reliance on such deed, release or mortgage, and affidavit executed and acknowledged by the grantor, releaser or mortgagor under penalty of perjury stating that, at the time of the delivery of the deed, release or mortgage, the affiant had no spouse then entitled to claim the benefit of an existing estate of homestead, shall be conclusive proof of the nonexistence of such benefit at that time.

Note two things about this provision. First, it’s necessary to have a deed, release or mortgage that contains the recitation regarding marital status. Keep in mind that a statement in the deed that the grantor is “unmarried” is not sufficient because in certain instances a prior spouse (if he or she occupies the property as a principal residence) needs to release. The affidavit alone is not sufficient because the statute speaks in terms of a “deed, release or mortgage containing a statement of the marital status,” and the affidavit provision refers to “such deed.” Second, it’s necessary to have the affidavit in conjunction with the deed because, unlike the recitation in the deed, release or mortgage, the affidavit is “conclusive proof” of the marital status. Presumably (but this is not clear) the affidavit could be included in the deed, but in such a case, because it is an affidavit, there would have to be a statement that the facts recited are under the penalties of perjury or a jurat (not just a simple acknowledgment) would be required. Simply tracking the statute’s language in the affidavit (stating that, at the time of the delivery of the deed, release or mortgage, the affiant had no spouse then entitled to claim the benefit of an existing estate of homestead) would seem to be the advisable way to draft the affidavit.

Disclosures. Under the new law it is necessary for closing attorneys now to provide a notice to the mortgagor of the benefits of a homestead:

In all mortgage transactions, the closing attorney or settlement agent shall provide the mortgagor with notice of the right to declare homestead protection pursuant to this chapter, receipt of which shall be acknowledged in writing by the mortgagor. The notice shall include, but not be limited to, a summary of the differences between the automatic homestead protection and the enhanced benefits acquired by making a declaration of homestead.

Homestead Rights in Proceeds. The new statute specifically protects proceeds from a sale of property that was subject to a homestead during these periods:

Existing Homesteads. The statute provides that “All existing estates of homestead in effect on the effective date of this act shall continue in full force and effect notwithstanding the repeal of any law under which they were created and shall be governed by this act, notwithstanding their failure to comply with the execution requirements of section 5 of chapter 188 of the General Laws, as appearing in section 1 of this act.” Therefore, there is no need to record a new homestead after the new law is effective, even though the existing homestead does not comply with the formalities set out in Section 5 of the statute. The old homestead, however, will otherwise be governed by the new law.