In case you missed our blog post on Bank Law Monitor last month regarding the Homestead Exemption, significant changes to the Washington homestead statute were made that impacts property owners and contractors alike. Senate Bill 5408 became effective on May 12, 2021 and increases the homestead exemption from $125K (the minimum) to $780K or so if you live in King County.
The exemption amount is based on “the county median sale price of a single-family home in the preceding year.” This will vary from county to county and year to year. The current median home price for Washington State is $491,900. A court will rely on data on the county median sale price of a single-family home from the Washington Center for Real Estate Research or a successor entity designated by the Office of Financial Management.
The Final Bill Report includes a short summary on the impact of the new law:
- Homestead includes real or personal property a dependent of the owner uses as a residence. A dependent has the same meaning as in federal bankruptcy code. A dependent of a homeowner is not required to sign off on any documents needed to transfer the property.
- A forced sale is defined to include any sale of the homestead property in a bankruptcy proceeding which essentially adopts the holding of the court in the decision of In re Good 588 B.R. 573 (Bankr. W.D. Wash. 2018). State law now provides that the exemption is determined on the date of filing and that appreciation after that date belongs to the debtor.
- These homestead exemptions will impact unsecured creditors, particularly in bankruptcy cases but secured creditors such as mortgage holders and lien claimants will continue to have priority for their claims on real property. This should only reinforce the importance of making sure contractors perfect their lien rights so their contract rights do not fall behind the significant new protection now afforded homeowners under the homestead exemption.