Homesteading generally protects against forced sale to satisfy debt

By HOLLY IVY DE VORE

REAL ESTATE WRITER

Moving into a new home is time-consuming enough, not to mention the time spent sorting through myriad solicitations that arrive soon after in the mail. Among the offers sent by window covering companies, yard maintenance firms, and house cleaning and swimming pool services are those from businesses that specialize in filing declaration of homestead documents for the new owners.

By filing such a declaration, the owner ensures that the family home and its immediate adjoining land are generally protected from being sold to satisfy a debt. In Nevada, this means the owner can protect the first $125,000 of equity in his house, townhome, condominium or mobile home from lawsuits, bankruptcy or general creditor claims such as unpaid medical bills, credit card debt, and unpaid business or personal loans. A creditor may still record a judgment lien on the home, but cannot force the owner to move out.

It also must be noted that a homestead declaration does not protect against mortgage debt, owed taxes, an IRS lien, mechanic's lien, or child support or alimony payments. Thus, mortgages and Uncle Sam still must be paid.

Clark County charges a $7 fee to file a declaration of homestead, while companies that solicit new homeowners through the mail typically charge in the $25 to $50 range, according to Cheryl Ritter, office services supervisor in the county Recorder's Office.

"The county doesn't send out homesteading forms to new home buyers, but homeowners may receive them in the mail from a couple of businesses," Ritter said. "For an additional fee, they will help you file and record a homestead, saving a homeowner's time, but homeowners can come here and do it themselves. People can get the form at the Recorder's Office, from the county's Web site or from an office supply store."

The filing process is simple and requires information found on the home's deed, including the property's legal description, parcel number and owner's name. This information is also on file in the county Assessor's Office.

"If anyone has any questions about filling out the form, the Recorder's Office will direct them to the law library or to seek legal advice. This is because we are not allowed to give legal advice," Ritter said.

Once the form is completed, it must be notarized before it can be recorded, a service which is offered in the Recorder's Office free of charge. The notarized form can either be mailed or hand delivered.

"The entire process, including filling out the form and recording it, usually takes about a half hour in the office, depending on how busy we are," Ritter said, pointing out that her office is usually busiest at the end of the month, on Fridays, and on the day before a holiday. The least busy time is typically during the morning hours. The office is open Monday through Friday from 8 a.m. to 5 p.m.

Clark County officials have been trying to keep pace with the past decade's home-buying boom in Southern Nevada. In 1990, there were 11,703 declarations of homestead filed; in 1999, filings skyrocketed to 30,168; and from Jan. 1 through Aug. 31, 2000, the latest time frame available, filings had already totaled 20,517.

When asked about the benefits of filing a declaration of homestead, Bob Aalberts, professor of legal studies at the Lied Institute for Real Estate Studies at the University of Nevada, Las Vegas, has a simple answer.

"You'd be nuts not to do it," he said. "It is a very valuable tool to homeowners because it can protect your home from general creditors.

"Homesteading varies from state to state and our state is one of the better ones, except for Texas and Florida because Texas and Florida protect all of your equity," Aalberts said. "It's not uncommon though for a state to only protect $15,000 or $25,000 of equity in a homestead, so Nevada has one of the better laws with a $125,000 exemption."

Jeffrey Stempel, professor of law and dean of academic affairs at UNLV, said homestead exemptions with no limit have been cause for concern in some states.

"Sometimes people criticize homestead exemptions, like in the state of Florida where there is no limit, because homesteading can give people a way to dodge creditors, to say it bluntly," Stempel said.

"There have been cases in Florida where people build multi-million dollar homes and put all of their equity in it to avoid paying their debts. I think that having limits in the amount of an exemption deters that. ... It seems pretty prudent to (place) the amount of an exemption based on the current housing market."

SB83, which would increase the homestead exemption to $160,000 in Nevada, has been proposed to the state Legislature, and a hearing before the Senate Judiciary Committee is scheduled on Wednesday. If passed, the new exemption would also apply to previously declared homesteads.

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