Bill Summary – FastDemocracy

CERTIFICATION OF ENROLLMENT
                ENGROSSED SUBSTITUTE SENATE BILL 5408
                       Chapter 290, Laws of 2021
                               67th Legislature
                             2021 Regular Session
               HOMESTEAD EXEMPTION—VARIOUS PROVISIONS
                      EFFECTIVE DATE: May 12, 2021
Passed by the Senate April 19, 2021                 CERTIFICATE
  Yeas 42 Nays 7
                                       I, Brad Hendrickson, Secretary of
                                       the   Senate   of  the   State   of
              DENNY HECK               Washington, do hereby certify that
President of the Senate                the     attached   is     ENGROSSED
                                       SUBSTITUTE SENATE BILL 5408      as
                                       passed by the Senate and the House
                                       of Representatives on the dates
Passed by the House April 16, 2021     hereon set forth.
  Yeas 94 Nays 3
                                                BRAD HENDRICKSON
            LAURIE JINKINS
                                                                   Secretary
Speaker of the House of
Representatives
Approved May 12, 2021 3:11 PM                          FILED
                                                    May 12, 2021
                                               Secretary of State
              JAY INSLEE                       State of Washington
Governor of the State of Washington
                     ENGROSSED SUBSTITUTE SENATE BILL 5408
                            AS AMENDED BY THE HOUSE
                   Passed Legislature - 2021 Regular Session
     State of Washington         67th Legislature     2021 Regular Session
     By Senate Law & Justice (originally sponsored by Senators Stanford,
     Das, Dhingra, Hasegawa, Kuderer, Lovelett, Nguyen, Randall, Robinson,
     Rolfes, Saldaña, and Wellman)
     READ FIRST TIME 02/15/21.
      AN ACT Relating to the homestead exemption; amending RCW
  6.13.010, 6.13.030, 6.13.060, 6.13.070, 6.13.080, and 61.24.100;
  creating a new section; and declaring an emergency.
 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
     NEW SECTION.   Sec. 1.   The legislature finds that the homestead
 exemption is intended to protect the homeowner's equity in a home
 against unsecured creditors. The legislature finds that changes to
 the homestead exemption are necessary to modernize the law and to
 address the case of Wilson v. Rigby, 909 F.3d 306 (2018) and to adopt
 the reasoning in In re Good, 588 B.R. 573 (Bankr. W.D. Wash. 2018).
     Sec. 2. RCW 6.13.010 and 1999 c 403 s 1 are each amended to read
 as follows:
     (1) The homestead consists of real or personal property that the
 owner or a dependent of the owner uses as a residence. In the case of
 a dwelling house or mobile home, the homestead consists of the
 dwelling house or the mobile home in which the owner resides or
 intends to reside, with appurtenant buildings, and the land on which
 the same are situated and by which the same are surrounded, or
 improved or unimproved land, regardless of area, owned with the
 intention of placing a house or mobile home thereon and residing
                                       p. 1                    ESSB 5408.SL
 thereon. A mobile home may be exempted under this chapter whether or
 not it is permanently affixed to the underlying land and whether or
 not the mobile home is placed upon a lot owned by the mobile home
 owner or a dependent of the owner. Property included in the homestead
 must be actually intended or used as the principal home for the
 owner.
     (2) As used in this chapter((, the term "owner")):
     (a) "Owner" includes but is not limited to a purchaser under a
 deed of trust, mortgage, or real estate contract.
     (((3) As used in this chapter, the term "net)) (b) "Net value"
 means market value less all liens and encumbrances senior to the
 judgment being executed upon and not including the judgment being
 executed upon.
     (c) "Forced sale" includes any sale of homestead property in a
 bankruptcy proceeding under Title 11 of the United States Code. The
 reinvestment provisions of RCW 6.13.070 do not apply to the proceeds.
     (d) "Dependent" has the meaning given in Title 11 U.S.C. Sec.
 522(a)(1).
     Sec. 3. RCW 6.13.030 and 2007 c 429 s 1 are each amended to read
 as follows:
     ((A homestead may consist of lands, as described in RCW 6.13.010,
 regardless of area, but the homestead exemption amount shall not
 exceed the lesser of (1) the total net value of the lands,
 manufactured homes, mobile home, improvements, and other personal
 property, as described in RCW 6.13.010, or (2) the sum of one hundred
 twenty-five thousand dollars in the case of lands, manufactured
 homes, mobile home, and improvements, or the sum of fifteen thousand
 dollars in the case of other personal property described in RCW
 6.13.010, except where)) (1) The homestead exemption amount is the
 greater of:
     (a) $125,000;
     (b) The county median sale price of a single-family home in the
 preceding calendar year; or
     (c) Where the homestead is subject to execution, attachment, or
 seizure by or under any legal process whatever to satisfy a judgment
 in favor of any state for failure to pay that state's income tax on
 benefits received while a resident of the state of Washington from a
 pension or other retirement plan, ((in which event there shall be))
 no dollar limit ((on the value of the exemption)).
                                     p. 2                     ESSB 5408.SL
      (2) In determining the county     median sale price of a single-
  family home in the preceding year,    a court shall use data from the
  Washington center for real estate     research or, if the Washington
  center no longer provides the data,   a successor entity designated by
  the office of financial management.
     Sec. 4. RCW 6.13.060 and 2008 c 6 s 634 are each amended to read
 as follows:
     The homestead of a spouse or domestic partner cannot be conveyed
 or encumbered unless the instrument by which it is conveyed or
 encumbered is executed and acknowledged by both spouses or both
 domestic partners, except that either spouse or both or either
 domestic partner or both jointly may make and execute powers of
 attorney for the conveyance or encumbrance of the homestead. The
 conveyance or encumbrance of the homestead does not require that any
 dependent of the owner who is not a spouse or domestic partner
 execute and acknowledge the instrument by which it is conveyed or
 encumbered.
     Sec. 5.   RCW 6.13.070 and 1987 c 442 s 207 are each amended to
 read as follows:
     (1) Except as provided in RCW 6.13.080, the homestead is exempt
 from attachment and from execution or forced sale for the debts of
 the owner up to the amount specified in RCW 6.13.030.
     (2) In a bankruptcy case, the debtor's exemption shall be
 determined on the date the bankruptcy petition is filed. If the value
 of the debtor's interest in homestead property on the petition date
 is less than or equal to the amount that can be exempted under RCW
 6.13.030, then the debtor's entire interest in the property,
 including the debtor's right to possession and interests of no
 monetary value, is exempt. Any appreciation in the value of the
 debtor's exempt interest in the property during the bankruptcy case
 is also exempt, even if in excess of the amounts in RCW 6.13.030(1).
     (3) The proceeds of the voluntary sale of the homestead in good
 faith for the purpose of acquiring a new homestead, and proceeds from
 insurance covering destruction of homestead property held for use in
 restoring or replacing the homestead property, up to the amount
 specified in RCW 6.13.030, shall likewise be exempt for one year from
 receipt, and also such new homestead acquired with such proceeds.
                                     p. 3                      ESSB 5408.SL
      (((2))) (4) Every homestead created under this chapter is
  presumed to be valid to the extent of all the property claimed
  exempt, until the validity thereof is contested in a court of general
  jurisdiction in the county or district in which the homestead is
  situated.
     Sec. 6.   RCW 6.13.080 and 2019 c 238 s 215 are each amended to
 read as follows:
     The homestead exemption is not available against an execution or
 forced sale in satisfaction of judgments obtained:
     (1) On debts secured by mechanic's, laborer's, construction,
 maritime, automobile repair, material supplier's, or vendor's liens
 arising out of and against the particular property claimed as a
 homestead;
     (2) On debts secured:
     (a) ((by)) By security agreements describing as collateral the
 property that is claimed as a homestead; or
     (b) ((by)) By mortgages or deeds of trust on the premises that
 have been executed and acknowledged by both spouses or both domestic
 partners or by any claimant not married or in a state registered
 domestic partnership. The execution and acknowledgment of a mortgage
 or deed of trust by a dependent who is not a spouse or domestic
 partner is not required;
     (3) On one spouse's or one domestic partner's or the community's
 debts existing at the time of that spouse's or that domestic
 partner's bankruptcy filing where (a) bankruptcy is filed by both
 spouses or both domestic partners within a six-month period, other
 than in a joint case or a case in which their assets are jointly
 administered, and (b) the other spouse or other domestic partner
 exempts property from property of the estate under the bankruptcy
 exemption provisions of 11 U.S.C. Sec. 522(d);
     (4) On debts arising from a lawful court order or decree or
 administrative order establishing a child support obligation or
 obligation to pay maintenance;
     (5) On debts owing to the state of Washington for recovery of
 medical assistance correctly paid on behalf of an individual
 consistent with 42 U.S.C. Sec. 1396p;
     (6) On debts secured by a condominium, homeowners', or common
 interest community association's lien; or
                                     p. 4                     ESSB 5408.SL
      (7) On debts owed for taxes collected under chapters 82.08,
  82.12, and 82.14 RCW but not remitted to the department of revenue.
     Sec. 7.   RCW 61.24.100 and 1998 c 295 s 12 are each amended to
 read as follows:
     (1) Except to the extent permitted in this section for deeds of
 trust securing commercial loans, a deficiency judgment shall not be
 obtained on the obligations secured by a deed of trust against any
 borrower, grantor, or guarantor after a trustee's sale under that
 deed of trust.
     (2)(a) Nothing in this chapter precludes an action against any
 person liable on the obligations secured by a deed of trust or any
 guarantor prior to a notice of trustee's sale being given pursuant to
 this chapter or after the discontinuance of the trustee's sale.
     (b) No action under (a) of this subsection precludes the
 beneficiary from commencing a judicial foreclosure or trustee's sale
 under the deed of trust after the completion or dismissal of that
 action.
     (3) This chapter does not preclude any one or more of the
 following after a trustee's sale under a deed of trust securing a
 commercial loan executed after June 11, 1998:
     (a)(i) To the extent the fair value of the property sold at the
 trustee's sale to the beneficiary or an affiliate of the beneficiary
 is less than the unpaid obligation secured by the deed of trust
 immediately prior to the trustee's sale, an action for a deficiency
 judgment against the borrower or grantor, if such person or persons
 was timely given the notices under RCW 61.24.040, for (A) any
 decrease in the fair value of the property caused by waste to the
 property committed by the borrower or grantor, respectively, after
 the deed of trust is granted, and (B) the wrongful retention of any
 rents, insurance proceeds, or condemnation awards by the borrower or
 grantor, respectively, that are otherwise owed to the beneficiary.
     (ii) This subsection (3)(a) does not apply to any property that
 is occupied by the borrower as its principal residence as of the date
 of the trustee's sale;
     (b) Any judicial or nonjudicial foreclosures of any other deeds
 of trust, mortgages, security agreements, or other security interests
 or liens covering any real or personal property granted to secure the
 obligation that was secured by the deed of trust foreclosed; or
                                     p. 5                     ESSB 5408.SL
     (c) Subject to this section, an action for a deficiency judgment
 against a guarantor if the guarantor is timely given the notices
 under RCW 61.24.042.
     (4) Any action referred to in subsection (3)(a) and (c) of this
 section shall be commenced within one year after the date of the
 trustee's sale, or a later date to which the liable party otherwise
 agrees in writing with the beneficiary after the notice of
 foreclosure is given, plus any period during which the action is
 prohibited by a bankruptcy, insolvency, moratorium, or other similar
 debtor protection statute. If there occurs more than one trustee's
 sale under a deed of trust securing a commercial loan or if trustee's
 sales are made pursuant to two or more deeds of trust securing the
 same commercial loan, the one-year limitation in this section begins
 on the date of the last of those trustee's sales.
     (5) In any action against a guarantor following a trustee's sale
 under a deed of trust securing a commercial loan, the guarantor may
 request the court or other appropriate adjudicator to determine, or
 the court or other appropriate adjudicator may in its discretion
 determine, the fair value of the property sold at the sale and the
 deficiency judgment against the guarantor shall be for an amount
 equal to the sum of the total amount owed to the beneficiary by the
 guarantor as of the date of the trustee's sale, less the fair value
 of the property sold at the trustee's sale or the sale price paid at
 the trustee's sale, whichever is greater, plus interest on the amount
 of the deficiency from the date of the trustee's sale at the rate
 provided in the guaranty, the deed of trust, or in any other
 contracts evidencing the debt secured by the deed of trust, as
 applicable, and any costs, expenses, and fees that are provided for
 in any contract evidencing the guarantor's liability for such a
 judgment. If any other security is sold to satisfy the same debt
 prior to the entry of a deficiency judgment against the guarantor,
 the fair value of that security, as calculated in the manner
 applicable to the property sold at the trustee's sale, shall be added
 to the fair value of the property sold at the trustee's sale as of
 the date that additional security is foreclosed. This section is in
 lieu of any right any guarantor would otherwise have to establish an
 upset price pursuant to RCW 61.12.060 prior to a trustee's sale.
     (6) A guarantor granting a deed of trust to secure its guaranty
 of a commercial loan shall be subject to a deficiency judgment
 following a trustee's sale under that deed of trust only to the
                                     p. 6                     ESSB 5408.SL
 extent stated in subsection (3)(a)(i) of this section. If the deed of
 trust encumbers the guarantor's principal residence, the guarantor
 shall be entitled to receive an amount up to ((the homestead
 exemption set forth in RCW 6.13.030)) $125,000, without regard to the
 effect of RCW 6.13.080(2), from the bid at the foreclosure or
 trustee's sale accepted by the sheriff or trustee prior to the
 application of the bid to the guarantor's obligation.
     (7) A beneficiary's acceptance of a deed in lieu of a trustee's
 sale under a deed of trust securing a commercial loan exonerates the
 guarantor from any liability for the debt secured thereby except to
 the extent the guarantor otherwise agrees as part of the deed in lieu
 transaction.
     (8) This chapter does not preclude a beneficiary from foreclosing
 a deed of trust in the same manner as a real property mortgage and
 this section does not apply to such a foreclosure.
     (9) Any contract, note, deed of trust, or guaranty may, by its
 express language, prohibit the recovery of any portion or all of a
 deficiency after the property encumbered by the deed of trust
 securing a commercial loan is sold at a trustee's sale.
     (10) A trustee's sale under a deed of trust securing a commercial
 loan does not preclude an action to collect or enforce any obligation
 of a borrower or guarantor if that obligation, or the substantial
 equivalent of that obligation, was not secured by the deed of trust.
     (11) Unless the guarantor otherwise agrees, a trustee's sale
 shall not impair any right or agreement of a guarantor to be
 reimbursed by a borrower or grantor for a deficiency judgment against
 the guarantor.
     (12) Notwithstanding anything in this section to the contrary,
 the rights and obligations of any borrower, grantor, and guarantor
 following a trustee's sale under a deed of trust securing a
 commercial loa