The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Community Affairs
BILL: SB 132
INTRODUCER: Senator Hutson
SUBJECT: Rental of Homestead Property
DATE: February 1, 2021 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Paglialonga Ryon CA Favorable
2. FT
3. AP
I. Summary:
Section 196.061, F.S., specifies that a homestead property owner may abandon homestead
property and lose homestead property tax exemptions by renting "all or substantially all of a
dwelling." SB 132 amends this section of law to provide that renting a portion of homestead
property does not constitute abandonment if the homestead property owner continues to occupy
the dwelling physically.
The Revenue Estimating Conference has not yet determined the fiscal impact of the bill.
The bill takes effect July 1, 2021.
II. Present Situation:
General Overview of Property Taxation
The ad valorem tax or "property tax" is an annual tax levied by counties, municipalities, school
districts, and some special districts. The tax is based on the taxable value of the property as of
January 1 of each year.1 The property appraiser annually determines the assessed or "just value"2
of property within the taxing authority and then applies relevant exclusions, assessment
1
Both real property and tangible personal property are subject to tax. Section 192.001(12), F.S., defines “real property” as
land, buildings, fixtures, and all other improvements to land. Section 192.001(11)(d), F.S., defines “tangible personal
property” as all goods, chattels, and other articles of value capable of manual possession and whose chief value is intrinsic to
the article itself.
2
Property must be valued at “just value” for purposes of property taxation, unless the Florida Constitution provides
otherwise. FLA. CONST. art VII, s. 4. Just value has been interpreted by the courts to mean the fair market value that a willing
buyer would pay a willing seller for the property in an arm’s-length transaction. See Walter v. Shuler, 176 So. 2d 81 (Fla.
1965); Deltona Corp. v. Bailey, 336 So. 2d 1163 (Fla. 1976); Southern Bell Tel. & Tel. Co. v. Dade County, 275 So. 2d 4
(Fla. 1973).
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limitations, and exemptions to determine the property's "taxable value."3 In November of each
year, tax bills are mailed based on the previous January 1 valuation, and payment is due by
March 31.
The Florida Constitution prohibits the state from levying ad valorem taxes4 on real estate or
tangible personal property. It limits the Legislature's authority to provide property valuations at
less than just value unless expressly authorized.5
The just valuation standard generally requires the property appraiser to consider the highest and
best use of property;6 however, the Florida Constitution authorizes certain types of property to be
valued based on their current use (classified use assessments), which often result in lower
assessments. Properties that may receive classified use treatment in Florida include agricultural
land, land producing high water recharge to Florida's aquifers, and land used exclusively for
noncommercial recreational purposes;7 land used for conservation purposes;8 historical
properties when authorized by the county or municipality;9 and certain working waterfront
property.10
Homestead Tax Exemption
Every person11 having legal and equitable title to real estate and who maintains a permanent
residence on the real estate (homestead property) is eligible for a $25,000 tax exemption
applicable to all ad valorem tax levies, including levies by school districts.12 An additional
$25,000 exemption applies to homestead property value between $50,000 and $75,000.13 This
exemption does not apply to ad valorem taxes levied by school districts.
Save Our Homes Assessment Limitation and Portability
In 1992, Florida voters approved the Save Our Homes amendment to the Florida Constitution.14
The Save Our Homes assessment limitation limits the amount that a homestead property's
assessed value may increase annually to the lesser of 3 percent or the percentage increase in the
Consumer Price Index.15 The accumulated difference between the assessed value and the just
value is the Save Our Homes benefit.
3
See s. 192.001(2) and (16), F.S.
4
FLA. CONST. art. VII, s. 1(a).
5
See FLA. CONST. art. VII, s. 4.
6
Section 193.011(2), F.S.
7
FLA. CONST. art. VII, s. 4(a).
8
FLA. CONST. art. VII, s. 4(b).
9
FLA. CONST. art. VII, s. 4(e).
10
FLA. CONST. art. VII, s. 4(j).
11
FLA. CONST. art VII, s. 6(b), appears to equate a person with a family unit: “Not more than one exemption shall be allowed
any individual or family unit or with respect to any residential unit.
12
FLA. CONST. art VII, s. 6(a).
13
Id.
14
FLA. CONST. art. VII, s. 4(d). The Florida Legislature implemented the Save Our Homes amendment in s. 193.155, F.S.
15
FLA. CONST. art. VII, s. 4(d).
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The Save Our Homes assessment limitation is considered portable because a homestead property
owner may transfer this benefit when moving from one homestead property to another.16
Due to the homestead exemption effects and the Save Our Homes assessment limitation, many
homestead properties enjoy significant tax savings.
Commercial Use of Homestead Property
Section 196.012(13), F.S., provides that "[r]eal estate used and owned as a homestead means real
property to the extent provided in s. 6(a), Art. VII of the State Constitution, but less any portion
thereof used for commercial purposes, with the title of such property being recorded in the
official records of the county in which the property is located. Property rented for more than 6
months is presumed to be used for commercial purposes."17
Abandonment of Homestead Property
Both the homestead property tax exemption and the Save Our Homes assessment limitation may
be lost by a property owner that abandons homestead property. Failure to maintain a homestead
property as a permanent residence may constitute abandonment under certain circumstances.18
Section 196.061(1), F.S., describes when renting a homestead property constitutes abandonment:
"The rental of all or substantially all of a dwelling previously claimed to be a homestead
for tax purposes shall constitute the abandonment of such dwelling as a homestead, and
the abandonment continues until the dwelling is physically occupied by the owner.
However, such abandonment of the homestead after January 1 of any year does not affect
the homestead exemption for tax purposes for that particular year unless the property is
rented for more than 30 days per calendar year for 2 consecutive years."
Rental of Homestead Property Litigation
On various occasions, Florida courts have interpreted the Florida Constitution and Florida law to
decide whether the circumstances surrounding the rental of claimed homestead property
constitutes abandonment. Two cases that are particularly relevant to the rental of homestead
property are described below.
Karayiannakis v. Nikolits (December 9, 2009)19
This case involved Anna Karayiannakis, who owned a two-story apartment building containing
five units. Karayiannakis lived in one of the units and rented out the other four. In 2006 and
2007, she claimed all of her apartment building and the surrounding land as her homestead for
taxation purposes. However, the Palm Beach County Property Appraiser, Gary Nikolits,
measured her building's dimensions and determined that her residence represented approximately
16
See FLA. CONST. art. VII, s. 4(d)(8); see also s. 193.155, F.S.
17
See also Florida Administrative Code Rule 12D-7.013(5): “Property used as a residence and also used by the owner as a
place of business does not lose its homestead character. The two uses should be separated with that portion used as a
residence being granted the exemption and the remainder being taxed.”
18
See s. 196.031, F.S. and s. 193.155, F.S.
19
Karayiannakis v. Nikolits, 23 So.3d 844 (Fla. 4th DCA 2009)
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thirty-seven percent of the total building footprint. As such, the property appraiser concluded that
only thirty-seven percent of the land and improvements qualified for the property tax exemptions
provided by article VII, section 4(d), and section 6 of the Florida Constitution. The remaining
sixty-three percent of the property did receive homestead property tax exemptions.
Karayiannakis challenged this determination.
Eventually, the Fourth District Court of Appeals ruled that the property appraiser's division of
the property for the application of homestead property tax exemptions was valid:
"[T]he Legislature imposed express limitations on the property tax exemption and
assessment cap for homestead property. The tax exemption applies only to those parcels
classified and assessed as owner-occupied residential property or only to the portion of
property so classified and assessed. And only property that receives a homestead
exemption is subject to section 193.155, Florida Statutes (2007), the codification of
article VII, section 4(d)'s assessment cap for homestead property. The language in these
statutes shows that real property is divisible for tax exemption purposes and that the
special tax treatment afforded to homestead property in article VII, sections 4(d) and 6
does not apply to non-homestead property. Property used for commercial purposes,
which includes rental property, is non-homestead property." (Internal quotations
omitted)20
Furst v. Rebholz (June 19, 2020)21
In this case, Rod Rebholz owned a single-family residence. Rebholz permanently resided at the
dwelling and claimed the property as a homestead to receive the related tax exemptions. In late
2014, the Sarasota County Property Appraiser Bill Furst received a complaint about Rebholz and
discovered that he was renting one of his upstairs bedrooms to a tenant who had been renting the
room since March 1996 and that another upstairs bedroom had been rented sporadically during
that same period. The property appraiser retroactively revoked the homestead property tax
exemptions provided to Rebholz and claimed that the two bedrooms' rental was commercial use
that rendered fifteen percent of his residence ineligible for homestead tax exemption. On
November 6, 2014, the property appraiser recorded a tax lien against Rebholz's property for
$7,023.87. Rebholz challenged the property appraiser's determination about the tax-exempt
status of his property.
Florida's Second District Court of Appeal eventually decided this case in favor of Rebholz. In the
opinion, the court ruled that, based upon their analysis of the Florida Constitution, statutes, and
administrative codes, a property appraiser is not authorized to subdivide a homeowner's
permanent single-family residence to remove homestead tax exemptions when the owner rents a
bedroom or any other space within their home.
In making their decision, the court notes several vital facts that instructed their decision. First,
the court states that this case is distinguishable from Karayiannakis v. Nikolits because that case
did not involve the division of a homeowner's personal residence:
20
Karayiannakis at 846
21
Furst v. Rebholz, 302 So.3d 423 (Fla. 2nd DCA 2020)
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"The only issue before the Fourth District in Karayiannakis was whether the real property
surrounding the apartment building was contiguous to Karayiannakis' residence or part of
the commercial purpose of running an apartment building. Karayiannakis herself
conceded that the commercial portion of the apartment building could be severed from
her own unit for taxation purposes, but her one unit—where she maintained her
permanent residence—was never itself divided."22
Second, although the property appraiser never alleged that Rebholz rented out "all or
substantially all" of his dwelling as described in s. 196.061, F.S., the court recognized that this
statute was nevertheless noteworthy:
"[Section 196.061, F.S.,] illustrates that the Legislature has contemplated the effect that
the rental of a dwelling has on the eligibility to claim the homestead exemption and has
chosen to only effectuate a loss of the exemption if all or substantially all of the property
is rented. One can reasonably infer that this is because a homeowner who rents all or
substantially all of a dwelling is not maintaining that dwelling as their permanent
residence as defined by section 196.012(17)."23
Third, the court referenced that homestead protection from forced sale to satisfy a creditor's debt
under article X, section 4(a)(1), of the Florida Constitution. The court noted that these debtor
homestead protections applied to an entire residence regardless of the rental of portions therein.
When determining whether the debtor homestead protections apply to a residence being used for
commercial activity, courts consider "whether a unit or parcel is susceptible to division by
perpendicular and/or horizontal lines and whether such unit or parcel is lawfully conveyable as
an independent parcel under existing law."24 The Second District Court of Appeal applied this
geometric analysis to Rebholz's property:
"[T]he space Rebholz rented out in his home, the actual bedrooms may be outlined by
specific perpendicular and horizontal lines, but the same cannot be said for the common
spaces that the tenants shared with Rebholz and one another; furthermore, none of the
space used by the tenants could lawfully be conveyed as an independent parcel. This
analysis demonstrates the unique indivisible nature of a person's private permanent
residence."25
The court concluded their opinion by stating that an interpretation of the Florida Constitution and
law in favor of Furst, allowing the removal of tax exemptions for space rented within a home,
would "circumvent public policy and could create financial hardship for countless Florida
citizens who reside within their permanent residences while renting bedrooms or working from
home to make ends meet."26
22
Furst at 431
23
Id. at 432
24
Id.
25
Id. at 433
26
Id. at 434
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Since the issuance of this opinion, Furst has petitioned the Florida Supreme Court to review the
case. However, the Florida Supreme Court has yet to grant or deny jurisdiction of the case.27
III. Effect of Proposed Changes:
Section 1 amends s. 196.061, F.S., to specify that renting a homestead property portion does not
constitute abandonment if the homestead property owner continues to occupy the dwelling
physically.
Section 2 provides an effective date of July 1, 2021.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
Article VII, Subsection (b) of section 18 of the State Constitution, provides that except
upon the approval of each house of the Legislature by a two-thirds vote of the
membership, the Legislature may not enact, amend, or repeal any general law if the
anticipated effect of doing so would be to reduce the authority that municipalities or
counties have to raise revenue in the aggregate, as such authority existed on February 1,
1989. However, the mandate requirements do not apply to laws having an insignificant
impact,28, 29 which is $2.2 million or less for Fiscal Year 2020-2021.30 If the actual
reduction in property tax revenue exceeds $2.2 million, the mandates provisions may
apply.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions: