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15.2.2.2 Distinctions Between Rural and Urban Homesteads

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  3. Chapter 15 Protecting the Debtor’s Home, Tangible Personal Property, and Other Assets
  4. 15.2 Homestead Exemptions
  5. 15.2.2 What Homesteads Are Protected?
  6. 15.2.2.2 Distinctions Between Rural and Urban Homesteads

15.2.2.2 Distinctions Between Rural and Urban Homesteads

Many states distinguish between rural and urban homesteads, exempting much more land,15 and sometimes allowing much higher value,16 for rural homesteads. This enhanced exemption may be available only if the land is used for agricultural purposes.17 Some states also provide a separate exemption for personal property used in agriculture.18

The urban/rural distinction presents difficult problems when land uses are changing, municipalities are expanding into formerly unincorporated areas, and farmers turn to non-agricultural work to sustain themselves. Courts will generally consider the character of the area first, then whether the individual parcel is used for traditionally rural activities that support the family.19 The availability of municipal services is often determinative. A parcel that lacks sewer or fire protection service, or that is protected by the county sheriff rather than municipal police, is likely to be rural.20 In Texas, the availability of municipal services is a statutory criterion.21

Footnotes

  • 15 See, e.g., Ark. Code Ann. § 16-66-210 (quarter acre or eighty acres); La. Stat. Ann. § 20:1 (five acres or 200 acres); Tex. Prop. Code Ann. § 41.002 (West) (ten acres or 100 acres for individual, 200 acres for family).

  • 16 See, e.g., Minn. Stat. § 510.02 ($1,050,000 agricultural, otherwise $430,000).

    These amounts are adjusted on July 1 of even-numbered years, for changes in the Consumer Price Index. Minn. Stat. § 550.37(4a).

  • 17 See, e.g., In re Grimlie, 439 B.R. 710 (B.A.P. 8th Cir. 2010) (Minn. law) (denying enhanced agricultural exemption; debtors not principally engaged in farming when property was used to raise horses and hay but most income came from manufacture and sale of equipment); In re Baker, 307 B.R. 860 (Bankr. N.D. Tex. 2003) (cattle grazing and hunting on non-contiguous parcels is sufficient; placing land in conservation reserve does not eliminate homestead).

  • 18 See § 15.3, infra.

  • 19 In re Perry, 345 F.3d 303, 315–319 (5th Cir. 2003) (Tex. law) (rural homestead may be exempt under former version of statute even if used for non-agricultural purposes, here a campground); Painewebber Inc. v. Murray, 260 B.R. 815 (E.D. Tex. 2001) (factors include municipal services, location of the land, presence of platted streets; rural homestead was exempt when contiguous and non-contiguous tracts used for residence, recreation, gardening, hunting, woodcutting, and fishing); In re Schott, 449 B.R. 697 (Bankr. W.D. Tex. 2011) (operation of non-agricultural business, here a golf course, on rural parcel does not eliminate homestead); In re Engstrom, 370 B.R. 205 (Bankr. D. Minn. 2007) (“rural” not synonymous with “agricultural”; low-density use and lack of subdivisions were sufficiently rural to permit exemption of five-acre lot not used for farming); In re McLachlan, 266 B.R. 220 (Bankr. M.D. Fla. 2001) (homeowner in rural area could exempt contiguous lot with palm grove from which he occasionally sold palm trees; land can be part of rural homestead even though it is income producing); In re Kyllonen, 264 B.R. 17 (Bankr. D. Minn. 2001) (homestead not rural, despite debtors’ small-scale ginseng crop, when both debtors had full-time non-agricultural jobs, neighborhood was suburban and zoned “rural residential,” main land use was houses, and any farming was hobby; if character of the area is unclear, court will look at parcel’s use); In re Webb, 263 B.R. 788 (Bankr. W.D. Tex. 2001) (non-contiguous parcels rented to tenants unrelated to debtor not rural homestead; distinguishing farmland rented for share of crops); In re Cole, 205 B.R. 382 (Bankr. E.D. Tex. 1997) (when land not occupied by residence was pasture land, homestead was rural under former version of statute even though located within city limits); Davis v. Davis, 864 So. 2d 458 (Fla. Dist. Ct. App. 2003) (rural homestead may include non-agricultural income-producing property—here, a manufactured-home park); Baumann v. Chaska Bldg. Ctr., Inc., 621 N.W.2d 795 (Minn. Ct. App. 2001) (court should look first to character of area, then to use of parcel). See also Iowa State Bank & Tr. Co. v. Michel, 683 N.W.2d 95 (Iowa 2004) (land was agricultural within meaning of statute regulating waiver of homestead exemption when landowners pastured horses and grew feed for them there, even though neither worked the land themselves nor received income from agriculture; key question is whether land is “suitable for farming”). Cf. Marketic v. U.S. Bank, 436 F. Supp. 2d 842 (N.D. Tex. 2006) (Texas statute forbids foreclosure of home equity loan against property designated as agricultural for tax purposes as of date of foreclosure, even though not so designated at time of loan).

  • 20 In re Kelley, 455 B.R. 710 (Bankr. E.D. Ark. 2011) (urban/rural distinction highly fact-specific; when property had some municipal services, not including sewer and police, and debtor had a barn and some animals, factors were evenly balanced; applying principle of liberal construction to find property rural).

  • 21 Tex. Prop. Code Ann. § 41.002 (West). See, e.g., In re Bouchie, 324 F.3d 780 (5th Cir. 2003) (detailed history of Texas’ recently amended rural homestead definition; land was rural when it was within jurisdiction of a municipality but did not receive specified municipal services); Smith v. Hennington, 249 S.W.3d 600 (Tex. App. 2008) (property within city limits and served by municipal services was urban).