Introduction

The State of Texas is both unique and generous in its application of the homestead protection.  Regrettably, however, the generosity of the protection sometimes works to the detriment of individuals and families who are unfamiliar with its effect.  Consequently, it is hoped that this brief review of the Texas homestead laws will prove beneficial to anyone moving into the state or contemplating the purchase or improvement of a residence.

Definition

Simply stated, the homestead is a place where a family, or a single adult, makes their home or living, including the land and all of the buildings or improvements.  In an urban context, as opposed to a rural context, there can be either a residential or business homestead, or both as one "unit,” provided that both the residential and business homestead are located within the same urban area and, as a "unit," do not exceed the constitutional limitations.

The residential homestead, by far the most prevalent, is defined as either urban or rural.  An urban homestead consists of either a lot or lots of one (1) acre or less, and is usually located within a city or town.  The rural homestead consists of up to two hundred (200) acres for a family, or up to one hundred (100) acres for a single adult.  In both instances, the value of the land and the improvements is irrelevant.  Rather, homestead is based solely upon the size or acreage of the land involved.

Purpose of the Homestead

Texas achieved its first homestead exemption by statute on January 26, 1839.  Its purpose was threefold: (1) to preserve the integrity of the family as a basic element of social organization and to encourage colonization; (2) to provide the debtor with a home for his family and some means of support to recoup monetary losses so the family would not become a burden upon the public; and (3) to retain and pioneer the feeling of freedom and a sense of independence necessary to the continuing existence of a democratic society.

Recognizing that any mere statute is subject to the whim of the legislature, the Texas homestead exemption was incorporated in the State Constitution in 1845, to put it beyond the reach of the state legislators.  As a state constitutional protection, it has withstood the test of time and remained virtually unchanged as we have moved from the 19th century through most of the 20th century.

Exemption Provided

Under the Texas homestead exemption, as it existed through 1997, a residence is protected from forced sale by all creditors of the homeowner, except for:

the lender who loans the funds for the purchase of the homestead or provides the refinance money;

the tax man, in the form of the State, County, City and School ad valorem taxes that are assessed against the property each year; and

the contractor who provides material and/or labor in improving the homestead, and consequently, its value.

In the latter instance, however, the state statutes require that any home improvement loan, to be a valid lien against the homestead, must be in writing, executed by both the husband and the wife, if applicable, and be filed for record in the real property records of the county where the property is located.  In addition, the federal supremacy clause in the U.S. Constitution now allows the federal government to force the sale of the homestead for federal liens, such as non-payment of federal income taxes.

Effective January 2, 1998, the Texas Constitution has been amended to allow the homestead to also secure home equity loans and reverse annuity mortgages.  However, the restrictions on home equity loans are many, complicated and varied.  Of more consequence to borrowers is the fact that a home equity loan, when added to other existing debt, cannot exceed more than 80% of the appraised value of the homestead, nor can there be more than one (1) home equity loan at a time, and no more than (1) home equity loan per year against the homestead.

The positive effect of this homestead exemption means that if someone sues you and recovers a judgment against you, they cannot force you to sell your homestead to satisfy the judgment.

Circumvention of the Homestead Exemption

Because the homestead exemption is a state constitutional exemption, it cannot be waived.  The homestead may be abandoned, but only if another homestead is created, as when one house is sold and another is purchased or leased.

Conclusion

If it is remembered that Texas was settled by colonists looking for a better life, it is also evident that those same settlers were predominantly debtors fleeing the effects of pro-creditor laws then existing in other parts of the United States and abroad.  Consequently, they were very emphatic in their protection of the homestead.  Moreover, that same protection still exists today.