What changes in the Massachusetts Homestead Law means to homeowners

On December 16, 2010, Governor Deval Patrick signed into law a series of important amendments to the Homestead Act (Mass. General Laws, Ch. 188) that current and future homeowners should know about.  These changes will go into law on March 16, 2011.

At this point, you might very well be asking yourself what’s a “Homestead”?  Actually, the exact term is “Declaration of Estate of Homestead.”

This declaration is a legal document filed at the registry of deeds that informs the public that the homeowner is asserting his/her rights to protect the equity in the home from subsequent creditors. Upon filing a Declaration of Homestead, a person’s primary residence is protected against subsequent attachment, suit, or bankruptcy to the extent of five hundred thousand dollars ($500,000) of equity per residence, per family.

While a Homestead can protect the equity in many situations, there are some obligations that are not covered, such as debts relating to the purchase of the home (purchase money mortgages), tax obligations, and child/spousal support obligations.

The Two Major Changes You Should Be Concerned With:

  1. Under existing law, homeowners must file a Declaration of Homestead at the registry of deeds to obtain coverage. In March 2011 when these changes become effective, there will be automatic coverage in the amount of $125,000 without any filing.  However (and this is important to know), in order to obtain the maximum coverage of $500,000, the homeowner must still file the Declaration at the registry.This automatic coverage will protect homeowners who may not have heard of the Homestead Act, but clearly there remains a significant benefit to filing the Declaration at the registry.
  2. Although the maximum amount of coverage has not changed, the Act now allows homeowners to sell their primary residence, yet maintain the same Homestead protection on the proceeds of the sale. This protection is available for one year from the time of the sale or when a new primary residence is purchased, whichever is sooner.This new consumer-friendly provision may allow a homeowner who, for example, needs to sell the home to relocate for a new job or downsize their current home to a smaller home or condo. In some cases, this may provide an opportunity for a homeowner with debt-related issues to still purchase another home.

There are other changes to the law, but these are two of the major ones.  Just remember, with many issues, homeowners should consult their personal attorney regarding specific legal questions about the Homestead Act and how they may or may not be impacted by the new changes.