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Important Changes to the Massachusetts Homestead Exemption Act

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| Legal Advisory

On December 16, 2010, the Governor of Massachusetts signed into law a bill revising the Massachusetts homestead exemption law, G.L. c. 188, §§ 1-10.  Chapter 395 of the Acts of 2010 (the "Act"), which takes effect on March 16, 2011, provides, among other things, an automatic homestead exemption for all homeowners in Massachusetts and greater clarity on the application of the homestead exemption to specific circumstances. In particular, the Act provides the following benefits to homeowners:

  • All homeowners are given an automatic $125,000 homestead exemption for their primary residences without the need to file a declaration of homestead. For a home owned as tenants in common, the automatic exemption is allocated among the owners in proportion to their respective ownership interests in the home. The $500,000 maximum homestead protection is still available for homeowners who file a declaration with the applicable Registry of Deeds. Homestead declarations that were filed under the previous homestead law, prior to the Act taking effect, will remain valid and will be governed by and given the benefit of the Act.
  • The Act confirms that refinancing of a mortgage loan will not affect the applicability of a pre-filed homestead declaration.
  • The Act clarifies that a home owned in a trust may be protected by a declaration of homestead. For the beneficial interest holders of a trust to gain the benefit of a recorded declaration, the trustee must execute the declaration.
  • The Act also clarifies homestead protection for co-tenants, allowing separate homesteads to be declared for the same home, and providing that both the automatic and declared homesteads shall be allocated among all tenants in common and trust beneficiaries in proportion to their respective ownership interests in the home, while the amount of homestead protection provided to tenants by the entirety and joint tenants shall remain whole and unallocated between the owners.
  • The Act allows manufactured homes and multifamily homes (containing up to four units) to gain the benefit of the homestead exemption.
  • The Act provides homestead protection for the proceeds of a home sale until the earlier to occur of the homeowner’s acquiring a new principal residence or one year after the sale. The Act also provides homestead protection for insurance proceeds as a result of damage to a home until the earlier to occur of (i) reconstruction of the home being completed or the homeowner’s acquiring a new principal residence, or (ii) two years after the insurance payout.
  • The Act also has additional implications for real estate and bankruptcy professionals. Significantly, the Act requires that the closing attorney in all mortgage transactions provide the mortgagor with notice of the right to declare a homestead, and receipt of such notice must be obtained by the closing attorney in writing. In addition, the Act prohibits lenders from requiring a mortgagor to release or waive a declaration of homestead in connection with a mortgage transaction. Finally, the limit of the protection from creditors provided by the previous version of the homestead law has been expanded, since the provision that exempted pre-existing debt from homestead protection has been removed from the Act.

This advisory was prepared by Beth Mitchell of the Commercial Finance practice at Nutter McClennen & Fish LLP. For more information, please contact Beth or your Nutter attorney at 617.439.2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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