Qualifying for Homestead Exemption in Florida: How Prewitt and Warrick Narrowed the Field

Prewitt Mgmt. Corp. v. Nikolits is an appellate case that involved a dispute between appellant, Hal D. Prewitt (Prewitt) and appellee, Gary R. Nikolits (Nikolits).[1] Prewitt was the sole shareholder of an S corporation, Prewitt Management Corp. (PMC), and Nikolits was a Palm Beach County Property Appraiser. Prewitt loaned money to PMC to purchase residential real property in Palm Beach County where Prewitt and his family permanently resided.[2] After PMC’s purchase, it sought a homestead exemption for the property.[3] Nikolits denied the exemption based on his interpretation of Florida law indicating that real property owned by a corporation is not permitted a Homestead Exemption.[4]

The trial court entered summary judgment in favor of Nikolits, finding that no exemption was appropriate and that the property should be assessed without an exemption as it originally was by appellee Nikolits.[5] PMC Appealed the judgment of the trial court. The issue analyzed on appeal was whether a corporate entity of a type not enumerated under sections 196.031 or 196.041 of the Florida Statutes (1997) which holds title to residential real property qualifies for the homestead tax exemption under Article VII, section 6 of the Florida Constitution.[6]

PMC argued that the statutory list of corporate entities entitled to a homestead exemption is not exclusive, therefore, it was entitled to such an exemption pursuant to the Florida Constitution.[7] Conversely, Nikolits responded that the list is exclusive and therefore PMC, as an S corporation, does not fall within one of the enumerated types of corporate entities entitled to the homestead tax exemption.[8]

Florida Statutes sections 196.031 and 196.041 were the statutes at issue. Section 196.031 provides a homestead exemption to “[e]very person who . . . has the legal or beneficial title in equity to real property in this state and who resides thereon and in good faith makes the same his or her permanent residence.”[9] Section 196.041 describes different scenarios where the homestead exemption from ad valorem taxation applies to those holding equitable title to homestead property. Section 196.041 states that “. . . lessees owning the leasehold interest in a bona fide lease having an original term of 98 years or more in a residential parcel . . . shall be deemed to have legal or beneficial and equitable title to said property.”[10]

The court examined sections 196.031 and 196.041 to determine whether either statute was ambiguous or otherwise of doubtful meaning.[11] The court used the well-established principle of Florida law that the plain meaning of statutory language is the paramount consideration of statutory construction.[12] Further, the court considered the familiar rule of statutory construction expressio unius est exclusio alterius[13] which requires that when an unclear law expressly describes a particular situation where something should apply an inference must be drawn that what is not included by specific reference was intended to be omitted or excluded.[14] Applying these rules of statutory construction to the applicable statutes leads the court to the conclusion that the legislature intended to extend the homestead exemption only to owners of condominium and cooperative apartments and no others.[15] Both parties agreed that a wholly owned corporation which qualifies for sub chapter S status under the Internal Revenue Service Code is not on the list of corporate entities under section 196.031 that qualify for homestead exemption.[16]

 The court determined that the Florida Legislature has provided an exclusive list of equitably-owned properties entitled to a homestead exemption. [17] Because Prewitt’s property was not part of the exclusive list, it was not entitled to an exemption. Accordingly, the appellate court affirmed summary judgment for Nikolits.[18]

Prewitt Mgmt. Corp. v. Nikolits establishes that Florida legislature intended for Florida statutes sections 196.031 and 196.041 to extend the usual homestead exemption only to owners of condominium and cooperative apartments, and other entities enumerated in the statute and no others. In a subsequent case, Higgs v. Warrick, the County Property Appraiser, Higgs, argued that the provisions of Florida statutes sections 196.031 and 196.041 were to be interpreted to apply to condominiums and cooperative apartments only and Warrick’s single family home with a 98-year-plus lease through his own trust for his heirs of a residential parcel permanently occupied as a residence did not qualify for exemption.[19] Despite the holding in Prewitt narrowing the statute’s interpretation, in this case the court concluded that the plain and ordinary meaning of sections 196.031 and 196.041 clearly provides that a 98-year-plus lease of a residential parcel permanently occupied as a residence qualifies for a homestead exemption.[20] Therefore, Warrick’s single family residence parcel received homestead exemption.[21]

Florida law entitles every Florida resident who has legal or qualifying equitable title to real estate and maintains it as his or her permanent residence to apply for a single homestead property tax exemption. Although the court acknowledges the narrowing of Prewitt by the subsequent Warrick case, both are still good case law.

Referecnes:

[1] Prewitt Mgmt. Corp. v. Nikolits, 795 So. 2d 1001, 1002 (Fla. Dist. Ct. App. 2001). [2] Id. at 1002. [3] Id. [4] Id. [5] Id. [6]Prewitt, 795 So. 2d at 1002. [7] Id. [8] Id. [9] Fla. Stat. §196.031 (emphasis added). Exemption of Homesteads — provides in part: “(1)(a) Every person who, on January 1, has the legal title or beneficial title in equity to real property in this state and who resides thereon and in good faith makes the same his or her permanent residence, or the permanent residence of another or others legally or naturally dependent upon such person, is entitled to an exemption from all taxation, except for assessments for special benefits, up to the assessed valuation of $25,000 on the residence and contiguous real property, as defined in s. 6, Art. VII of the State Constitution. [10]  Stated in F.S. §196.041(1), a lessee under a bona fide 98-year lease is deemed to have legal or beneficial and equitable title to the homestead property subject to the lease. [11] Prewitt,  795 So. 2d at 1005. [12] Id. [13] Id. [14] Id. [15] Id. [16] Prewitt, 795 So. 2d at 1005. [17] Id. [18] Id. [19]Higgs v. Warrick, 994 So. 2d 492, 493 (Fla. Dist. Ct. App. 2008). [20] Id at 493. [21] Id.