Tuesday, February 27, 2007

Florida Property Tax News: Homestead Exemptions Continued After Building Damaged or Destroyed By Misfortune or Calamity— Or Intentional Demolition?

The 2006 Florida Legislature adopted a statute intended to preserve homestead exemption status of property damaged or destroyed by misfortune or calamity. Section 196.031(7), Florida Statutes, is effective January 1, 2006. Thus, it applies retroactively to the 2006 tax assessment roll, as well as to all future years’ rolls.

In summary, this new law provides that homestead exemption can be granted when a homestead property is damaged or destroyed by misfortune or calamity and is uninhabitable on January 1 after the damage if the property otherwise qualifies and the property owner notifies the property appraiser that he or she intends to repair or rebuild the property and live in it as the primary residence after it is repaired or rebuilt and the owner does not claim a homestead exemption on any other property. Failure by the owner to commence the repair or rebuilding within 3 years constitutes abandonment.

The law specifically revised section 196.031, Florida Statutes, as follows:

196.031 Exemption of homesteads.—

(7) When homestead property is damaged or destroyed by misfortune or calamity and the property is uninhabitable on January 1 after the damage or destruction occurs, the homestead exemption may be granted if the property is otherwise qualified and if the property owner notifies the property appraiser that he or she intends to repair or rebuild the property and live in the property as his or her primary residence after the property is repaired or rebuilt and does not claim a homestead exemption on any other property or otherwise violate this section. Failure by the property owner to commence the repair or rebuilding of the homestead property within 3 years after January 1 following the property’s damage or destruction constitutes abandonment of the property as a homestead.

Notably, the new relief ostensibly created by this statute has been advocated successfully by the author of this article as though it were already authorized. We have successfully taken the position on behalf of a number of different taxpayers that homestead exemption and the Save Our Homes Cap, once established, so long as it is not abandoned, can survive destruction of the improvements. Moreover, we have successfully taken this position even where the destruction was due to intentional demolition for planned redevelopment, and not solely due to misfortune or calamity. This position we believe to be well-founded, since permanent residence is not necessarily synonymous with physical occupancy—County Property Appraisers’ sometime position to the contrary notwithstanding.

Generally, we find our position on preservation of homestead exemption during and after demolition for rebuilding a private residence acceptable to the County Property Appraiser provided the following general guidelines are considered:

1. Reasonableness of length of absence from the homestead property, depending on the size and scope of the remodeling, renovation or reconstruction;

2. Factual indicia of continuing permanent residence;

3. Other place(s) of residency during absence from homestead;

4. Intention to return to homestead property upon completion of renovation, remodeling or reconstruction;

5. Applications for or status of homestead exemption or residency benefit elsewhere than on the property claimed as continuing homestead;

6. Any changes in applicable law.

Our policy—just as is the policy enshrined in the above-quoted newly-adopted statute—is to put the Property Appraiser on notice so as to attempt to prevent revocation of homestead during the period of reconstruction. In regard to estimating the time period involved, we ask the Property Appraiser to consider each case on its own facts in relation to the foregoing criteria. For example, if there were particular problems with a contract or a construction project, such facts should appropriately be reviewed when considering how long the taxpayer is physically absent from the homestead property. We believe this procedure sets a good example for other Florida property tax lawyers who desire to improve the quality of service provided to taxpayer clients

We take pains to make clear to the taxpayer—and to acknowledge to the Property Appraiser our understanding--that the work on the property and value added thereby will be assessed on the next succeeding tax roll in addition to value of the improvements in a prior year—or in lieu of the improvements if there is a complete demolition. Obviously, this added valuation should be done in a manner consistent with the constitution, the governing statutes and prevailing policies.

In the case of complete demolition, then, the only portion of the property which would be capped under the “Save Our Homes Amendment” would be the land. In many locations in Florida, particularly for waterfront properties homesteaded since the inception of the Save Our Homes Cap in 1996, tax savings can run into the tens of thousands of dollars annually.

If you have any questions or concerns about how this new statute relates to your property, or how to protect and preserve your homestead exemption from property taxation during periods of demolition and rebuilding, see your property tax consultant.

Also, remember to review the assessment of the new improvement the first time it appears on your Notice of Proposed Taxes in August. Be sure to consider appealing the assessment if you believe the Property Appraiser has assessed the improvements in excess of market value. You may have to contact the Property Appraiser’s office, or view your assessment online, to ascertain the value assigned separately to the improvements. The split between land value and building value do not appear on the state-approved form for the notice of proposed property taxes, although proposed revision are in the legislative hopper for 2007. And in making the decision whether to appeal, remember that (1) the cost approach to valuation of real estate is particularly applicable to new construction; and (2) the improvement valuation will be included in the assessment (together with the capped value on the land) to comprise your new homestead exemption base year assessment for all future years under the Save Our Homes cap. So don’t neglect timely undertaking this important decision-making process.
Daniel A. Weiss is a former Attorney Special Master for the Miami-Dade County Value Adjustment Board with over 26 years property tax experience. Mr. Weiss represented the Miami-Dade County taxing authorities in litigation and appeals between 1981 and 1995 and has since represented taxpayers in property tax matters. Mr. Weiss was named one of the top lawyers in real estate, zoning and land use by South Florida Legal Guide 2007. In Florida Super Lawyers 2006, Weiss was named one of the top 6 local government lawyers in South Florida.

In Florida Trend magazine™'s Legal Elite's issue, July 2004, Mr. Weiss was selected by his peers as one of the top 30 government lawyers in the State of Florida.

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