First Reported Case Considering Scope Of New Massachusetts Homestead Law
Advice To Homeowners: Get Your Homestead Declaration Recorded ASAP
One of the benefits of the new Homestead Protection Act signed into law last year is that homeowners can use homestead protections against many more creditors. Under the old homestead law, debts which arose prior to the recording of a homestead declaration were not affected at all by the homestead protection. For example, if a homeowner recorded a homestead declaration on January 1, 2005, but owed a debt to a contractor which arose on December 31, 2004, the contractor could still pursue the full amount.
Under the new homestead law, however, a homeowner is protected from a pre-existing debt (except mortgages) unless a creditor files an attachment or lien prior to the recording of the homestead declaration or if the contractor obtains a court execution “based upon fraud, mistake, duress, undue influence or lack of capacity.” The new Homestead Act is simply much more favorable to homeowners because most creditors do not file liens fast enough and most consumer debts are not the product of fraud, mistake, duress, etc.
Bad Facts Make Bad Law
A recent Superior Court decision in the case of Tewhey v. Bodkins (embedded below) is one of the first reported decisions interpreting the scope of pre-existing debt protection under the new Homestead Act, and illustrates that some confusion remains as to what it does and doesn’t cover. Unfortunately, this case is a classic example of the saying that “bad facts make bad law.”
In Tewhey, the parties were attorney and his former client who obtained a default judgment against the attorney for professional malpractice in her divorce. (It appears that the attorney did not bother to defend the case at all). In 2010, the client recorded on the title to the attorney’s residence a court execution for just short of $50,000. However, 9 months earlier, the attorney’s wife, who owned the property jointly, recorded a homestead declaration.
Under the new Homestead Act, since the wife recorded the homestead before the client recorded the court execution, the client was seemingly out of luck. Well, not so fast said Superior Court Judge Edward P. Leibensperger. No doubt recognizing that the client would get the short end of the homestead stick, the judge ultimately ruled that the client’s claim fell under the exception of a claim based upon “fraud, mistake, duress, undue influence or lack of capacity,” and thus, the client could proceed against the attorney’s property.
In my opinion, the judge misread the statutory language because legal malpractice is a tort and is not covered under the exclusion. We will see what the Appeals Court says as the case is now on appeal.
Take-Aways
As for take-aways, the case illustrates two important things. First, homeowners should get their homestead declarations recorded ASAP, before creditors take legal action. For most consumer debt such as credit cards, this will give you the maximum $500,000 protection. Second and likewise, for creditors, you need to get liens filed on debtor’s property ASAP before they record homestead protection, otherwise you’ll likely get the short end of the homestead stick.
If you need a homestead declaration prepared and recorded, my office will do it for a nominal fee. Please contact us at [email protected].
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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.
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