Sunday, April 24, 2011

F'closed Washington State Couple Blows State Homestead Exemption Eligibility By Abandoning Home Before Auction; Premature Move To Florida Costs $116K

A recent ruling from a 3-judge panel of a division of the Washington State Court of Appeals should serve as a reminder to homeowners facing foreclosure to be damned sure they don't have any equity in their home before deciding to abandon it.

In this case, the couple facing foreclosure left their Clarkston, Washington home and moved to Florida over six months before a nonjudicial foreclosure sale was carried out which generated surplus proceeds (aka "the overage") over and above the amount owed to the foreclosing mortgage holder of $116,377.85.

In a nutshell, the appeals court said that the couple abandoned their homestead rights by leaving the home over six months before the sale, and failed to file a notice of nonabandonment of their homestead rights.

Accordingly, they left themselves ineligible to pocket the surplus funds of $116,000+ in cold cash that was generated by the foreclosure sale by exempting them, pursuant to the state homestead exemption statute, from the slimy clutches of their other creditors.(1)

For the ruling, see In re the Trustee's Sale of the Real Property of Brown, ___ Wn. App. ___, ___ P.3d ___ (Wn. Ct. App, Div. 3, April 21, 2011) (for publication) (when link expires, GO HERE).

(1) The court addressed the homestead issue in this case in the following text (bold text is my emphasis):

  • Homestead Abandonment. The Browns first argue that the trial court erred in concluding that they had abandoned their Clarkston home; instead, they were on an extended holiday in Florida. The evidence supports the trial court’s view of the matter.

    RCW 6.13.070 exempts homesteads from execution on judgments against the owner of the homestead in an amount up to $125,000. A homestead is “the real or personal property that the owner uses as a residence.” RCW 6.13.010. An owner is presumed to have abandoned a homestead when the owner vacates the property for six months or longer. RCW 6.13.050.

    However, an owner may execute and file a declaration of nonabandonment with the county recording officer in the county where the property is situated. Id. Abandonment of a legal right is generally a question of fact. See Moore v. Nw. Fabricators, Inc., 51 Wn.2d 26, 27, 314 P.2d 941 (1957).

***

  • In the present case, there is no real dispute that the Browns had vacated the property for over six months. There is also no dispute that they did not file a notice of nonabandonment of their homestead rights.

    The trial court noted that a permanent shutoff of water to the property at the end of May indicated intent not to return. The Browns’ acquisition of Florida driver’s licenses and licensing vehicles in Texas was also persuasive evidence that the Browns had abandoned their homestead. They quit making payments on the Clarkston residence in favor of paying rent in Florida.

    The statement of Florida domicile, although not before the trial court, is further compelling evidence that the Browns had abandoned the Clarkston home. There was substantial evidence to support the trial court’s finding. The Browns also contend that they must affirmatively abandon the homestead. The argument is without merit in light of the plain language of RCW 6.13.050 that mere absence from the property for six months constitutes a presumption of abandonment.

    The trial court’s determination of abandonment is supported by substantial evidence in the record as well as the statutory presumption of abandonment. There was no error.