Liens, if enforced, can result in ouster of the owner from his or her property. In this regard it is important to understand how homesteads can protect an owner's possession and occupation of a home. Under Chapter 395 of the Acts of 2010 (effective as of March 16, 2011), a statute that entirely re-writes G.L.c. 188, three types of homesteads come into existence in Massachusetts. Two types - the "regular" homestead and the one for elderly/disabled persons 62 years of age or older - are familiar to conveyancers (although some of the rules concerning them have changed in the new law) while the third type - the "automatic" homestead - is entirely new. How these forms of homestead are created and what methods are available for extinguishing or subordinating them is the subject of this bulletin.

CAUTION: The new statute becomes effective March 16, 2011. Drafting documents or applying the provisions of the statute before that time can lead to unwanted results.

Declared Homesteads. The "regular" homestead and the one for elderly/disabled persons are both "declared" homesteads, created by the recording of a declaration of homestead. They are each in the amount of $500,000. The "regular" variety is sometimes called a "Section 3" homestead (a reference to §3 of Chapter 188 of the General Laws), while the homestead for elderly/disabled persons is designated a "Section 2" homestead. A Section 3 homestead protects the declarant and his/her family (a defined term in the statute) while a Section 2 homestead protects only the declarant (with a notable exception for continued benefit of the homestead in favor of a surviving spouse or a spouse to whom the declarant makes a conveyance, discussed below). The creation of these two types of homesteads is governed by Section 5 of the statute, which requires the following:

• The homestead must be signed (i) under the penalties of perjury by (ii) each owner to be benefited by the homestead (or if held in trust by the trustee, in which case the beneficiaries of the trust are the benefitted parties of the homestead). This is new: under prior law only one owner signed the declaration even though other persons (e.g., spouse, children) who were titled or not titled might benefit from it, Moreover, under the ruling in Assistant Recorder of the North Registry District of Bristol County v. Spinelli 38 Mass.App.Ct. 655, 651 N.E.2d 411 (1995) a trustee was previously unable to declare a homestead.
  
• Each owner who is benefited from the homestead and the owners' non-titled spouse must be identified in the declaration. This, too, is new.
  
  
• The declaration must state that each person identified therein occupies or intends to occupy the home as their principal residence. This is a confusing requirement (and appears in another section of the statute as well) because the provision applies to all declared homesteads, both the regular and the elderly/disabled persons types. In the latter type, where the homestead is of the "stand-alone" variety, protecting only the elderly or disabled owner who makes the declaration, the statute requires (in another subsection), for example, that a non-titled spouse must be identified in the declaration and once so identified this subsection requires all persons, including the non-title spouse, to state that they occupy or intend to occupy the property. A similar provision is found in Section 2 of the statute (the definition of an elderly/disabled persons homestead) that states that "each owner" must occupy or intend to occupy the property. It is presumed (but the statute does not clearly articulate it) that the requirement is that each owner making the elderly/disabled persons declaration would have to occupy the property in order for that person to be benefitted by the homestead, and would have to make a statement to that effect. (The prior statute only required the party making the elderly/disabled persons declaration to occupy or intend to occupy the property.) Moreover, although the "automatic" homestead recognizes that spouses may in fact live in different homes this provision does not leave that as a possibility as the declaration must (i) identify the owner and his or her titled or non-tilted spouse and then (ii) requires that there be a statement in the declaration that "all persons named therein" must occupy or intend to occupy the property, which may not be the case.
  
  
• In the case of a Section 3 homestead, if the property is co-owned by a married couple and both occupy or intend to occupy the property the declaration must be signed by both spouses. Interestingly, in contradistinction to the provision above mentioned, this provision does posit that "if . . . both [spouses who are owners] occupy or intend to occupy" the property they must both sign the declaration, suggesting that the legislature recognized that some pairs of spouses won't occupy the property together.
  
  
• In the case of a Section 2 homestead the declaration must state that the owner to be benefitted is an elder person or a disabled person and in the case of the latter must be accompanied by a disability award letter or a letter from a physician certifying that the person is disabled.

Section 2 of the new statute tracks some language that appeared in the old law. At one point the statute provides that the "estate of homestead" of the elderly/disabled person is protected against attachment, etc. An estate of homestead, of course, is a possessory estate, one that provides a place for a person to live. Later, the statute states that "an owner of a home" who qualifies to and does record a Section 2 declaration "shall . . . be eligible for protection of such ownership interest." It seems that the statute, as was the apparent case in the prior version, is trying to make a distinction between, and to provide protection for both an "estate of homestead" and an "ownership interest." That is, the possessory interest as well as the title to the property itself seems somehow to be protected.

Although it was rarely done it was possible under the prior law to create a homestead in the grantee in the deed of conveyance to him or her, but the statute no longer permits this.

Although there was little doubt that such would be the case under the prior law, the new law specifically states that if an individual declares a homestead under Section 3 and then subsequently marries that the individual's spouse will benefit from the homestead.

A very important sentence appears in the new law that addresses the question of the preservation of homestead rights in the case of a subsequent declaration of homestead. Under the prior law - and also under the new law - a subsequent homestead declaration will terminate a prior homestead (a party can have only one homestead at a time) but the new law, although providing that the new declaration will terminate the prior homestead nonetheless permits the new homestead to relate back to the time of the creation of the prior homestead. Here's what the statute says:

Any subsequent recording of a declaration of homestead benefitting (i) a family member identified on a prior declaration on the same home; or (ii) the spouse of that person, without an intervening release, shall relate back to the filing date of the earliest recorded declaration, but the provisions of this chapter pursuant to which the later recorded declaration was made shall control the rights of a person identified in the later declaration.

Automatic Homesteads. An automatic homestead arises without any declaration upon the acquisition of a home occupied or intended to be occupied by the purchaser as his or her principal residence. It is in the amount of $125,000, so it is obvious that it is more advantageous to declare a homestead. If a declared homestead is created it will supersede the automatic one, but the statute is clear to state that the subsequent declared homestead "shall not terminate the automatic homestead exemption applicable to the period between the creation of the automatic homestead and the later recording of the declaration of homestead," thus providing once again a relation back effect. Moreover, if the declared homestead is thereafter invalidated or terminated, the automatic homestead will be reinstated as of the date of its creation, thus preserving the protection originally acquired. Similarly, the statute provides that where a declared homestead exists on one property and a subsequent homestead is declared on another (thus terminating the first homestead) but the subsequent declaration is later invalidated, the prior declaration of homestead is not reinstated, but "the owner shall have the benefit of the provisions of Section 4 [the automatic homestead]." Unfortunately, the statute doesn't specify to which property the automatic homestead applies, but presumably it is the property on which the second declaration was made.

Termination, Release or Subordination of Homesteads. A homestead under Section 3 ("regular") or Section 4 (automatic) will be terminated upon any of the following:

• A deed to a non-family member conveying the home, signed by the owner and a non-owner spouse or former spouse residing in the home as a principal residence. (With regard to an elderly/disabled persons homestead, it will terminate upon the sale of the property to anyone except that where the elderly/disabled person is also the transferee of all or a portion of the transferred interest termination will not occur.)
  
  
• A recorded release of the estate of homestead duly signed and acknowledged by the owner and a non-owner spouse or former spouse residing in the home as a principal residence. (With regard to an elderly/disabled persons homestead a release from the declaring owner alone will effect termination.)
  
  
• The abandonment of the home. Exactly what amounts to abandonment is not spelled out in the statute. (This provision also applies to an elderly/disabled persons homestead.)
  
  
• The declaration of a homestead on other property. (This provision also applies to an elderly/disabled persons homestead.)
  
  
• In the case of property held in trust a deed or release of homestead by the trustee.

Deeds between spouses or from a trustee to a beneficiary will not terminate a homestead unless there is an express release in the instrument. And in the case of an elderly/disabled persons homestead if the declarant conveys to or is survived by a spouse who occupies or intends to occupy the property as a principal residence and who does not have the benefit of a homestead under Section 2 or 3 then that spouse will have the benefit of the previously recorded declaration as if such declaration had been recorded under Section 3, until the spouse becomes eligible for and declares a homestead under Section 2.

A homestead created under Section 3 (regular) or Section 4 (automatic) shall, at the time of the death or divorce of the person holding the estate of homestead continue for the benefit of the surviving spouse or the former spouse and minor children who occupy or intend to occupy the home as their principal residence.

Homestead Subordination to Mortgage. The release of a homestead with regard to the granting of mortgages is now handled differently in the new law. Under the old law if there was a spouse (titled or non-titled) he or she had to release the homestead either as a grantor (if he or she was in title) or by simply signing the mortgage (if non-titled). Now, in the case of mortgages, the participation of non-titled spouses is unnecessary:

An estate of homestead shall be subordinate to a mortgage encumbering the home executed by all the owners of the home. For the purposes of this chapter, a mortgage shall include an instrument granting a security interest in a manufactured home or cooperative housing unit. The subordination shall not require the signature of a spouse who is not an owner.

No statement that a homestead estate shall be subordinate to the mortgage shall be required in the mortgage instrument and nothing contained in a mortgage or any document executed in connection with the mortgage shall affect or be construed to create, modify or terminate a homestead estate, other than to subordinate it to the mortgage as aforesaid.

This provision clarifies a near universal misunderstanding as to the prior law. It was believed by many conveyancers that a release of homestead contained in a mortgage resulted in the homestead being terminated, and thus requiring a new declaration to re-create it. However, §6 of the old statute prevented this unwanted result. With regard to mortgages and the release of homesteads, the statute gives this caution to lenders:

A mortgage lender shall not require or record a release of homestead in connection with the making and recording of as mortgage.

This provision will eliminate the somewhat frequent practice (probably based on uncertainty of the effect of a homestead release in a mortgage under prior law) of requiring or encouraging the recording of a new homestead after a refinance. Such a recording under the old statute and now even under the new statute where there is this intervening release, can have devastating effects.

Determining Who Must Release. When it comes to instruments other than mortgages how do we know whether there is a non-titled spouse who needs to sign or that there is no such non-titled spouse to be concerned with? (The statute provides that a non-title spouse must be identified in the declaration, but a divorce or death, followed by remarriage, would introduce a new non-titled spouse whose identity is not established by the record. Moreover, in the case of an "automatic" homestead the non-titled spouse is never the subject of identification as there is no declaration.) The statute provides a "safe harbor":

A deed, release or mortgage containing a statement of the marital status of a grantor may be relied upon by a good faith purchaser for value, As to acts undertaken in good faith reliance on such deed, release or mortgage, and affidavit executed and acknowledged by the grantor, releaser or mortgagor under penalty of perjury stating that, at the time of the delivery of the deed, release or mortgage, the affiant had no spouse then entitled to claim the benefit of an existing estate of homestead, shall be conclusive proof of the nonexistence of such benefit at that time.

Note two things about this provision. First, it's necessary to have a deed, release or mortgage that contains the recitation regarding marital status. The affidavit alone is not sufficient because the statute speaks in terms of a "deed, release or mortgage containing a statement of the marital status," and the affidavit provision refers to "such deed." Second, it's necessary to have the affidavit in conjunction with the deed because, unlike the recitation in the deed, release or mortgage, the affidavit is "conclusive proof" of the marital status. Presumably (but this is not clear) the affidavit could be included in the deed, but in such a case, because it is an affidavit, there would have to be a statement that the facts recited are under the penalties of perjury or a jurat (not just a simple acknowledgment) would be required.

Disclosures. Under the new law it is necessary for closing attorneys now to provide a notice to the mortgagor of the benefits of a homestead:

In all mortgage transactions, the closing attorney or settlement agent shall provide the mortgagor with notice of the right to declare homestead protection pursuant to this chapter, receipt of which shall be acknowledged in writing by the mortgagor. The notice shall include, but not be limited to, a summary of the differences between the automatic homestead protection and the enhanced benefits acquired by making a declaration of homestead.

Homestead Rights in Proceeds. The new statute specifically protects proceeds from a sale of property that was subject to a homestead during these periods:

• In the event of a sale, whether voluntarily or involuntarily, or a taking, for a period ending on the date of which the person benefited by the homestead either acquires another home the person intends to occupy as a principal residence or one year after the date on which the sale or taking occurred, whichever first occurs; and
  
  
• In the event of a fire or other casualty, for a period ending on: (i) the date upon which the reconstruction or repair to the home is completed or the date on which the person benefited by the homestead acquires another home the person intends to occupy as a principal; residence or (ii) two years after the date of the fire or other casualty, whichever first occurs.