Can You Waive Homestead Protection In Loan Documents?

A client’s real estate development company obtained a large construction loan from a commercial bank. The client personally guaranteed the loan. The company will soon be unable to pay the loan so that the loan and guarantee will be in default. The guarantee document contained a clause which stated that the borrower waived Florida homestead protection to the extent allowed by law. The client use to transfer non-exempt money to pay down the homestead mortgage in order to protect the money from a future judgment in the event the lender sues on the guarantee. The client asks whether the homestead waiver forfeits his homestead protection including cash paid toward the mortgage soon prior to a lender lawsuit.

The Florida Supreme Court has reviewed the issue of homestead waivers. The Court decided that homestead protection could be waived in favor of a mortgage lender or in favor of a spouse in a pre-nuptial agreement. Homestead protection cannot be waived in favor of a creditor. The Court said that public policy prohibits a homeowner from “in the stroke of a pen” forfeiting an important Constitutional protection of his family home. (Chames v. DeMayo).

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida