Question: I own a single-family house in a common interest development with a homeowners association. I was going to file a Declaration of Homestead on my title, but a friend told me California has an automatic homestead exemption so I don't have to file. Is that correct?
Also, the board keeps issuing special assessments for regular maintenance that should be paid from our reserve account because the board doesn't want to deplete the reserve account. I added loss assessment insurance to my regular homeowners' policy so I wouldn't have to pay these special assessments, but the insurer declined my claim. I don't understand why.
Answer: There does not appear to be a presumption of an automatic Homestead Exemption across the board in California. What might be interpreted as an automatic exemption, if it exists, is a narrow application for certain bankruptcy proceedings.
It would be risky not to file the Declaration of Exemption and to then argue reliance on a so-called automatic application of the exemption. Filing the exemption is prima facie evidence that a homestead exists.
If the records of the county tax assessor indicate that there is a current exemption filed, then a judgment creditor has the burden of proving that the dwelling is not a homestead. If the records do not indicate a filed exemption, the burden of proof is on the person who claims that the dwelling is a homestead.
If the court determines the dwelling is exempt, the court shall determine the amount of the homestead exemption and the fair market value of the dwelling.
Typically, California's Judicial Council determines adjustments of exemption amounts in three-year intervals. Senate Bill 308, which is pending, would increase the statutory amounts of homestead and other exemptions to reflect those amounts as adjusted by the Judicial Council effective April 1, 2013.
For example, the present homestead exemption is $75,000, $100,000 or $175,000, depending on certain characteristics of the homestead's residents. Senate Bill 308 would increase these exemptions to $100,000, $150,000 or $300,000, respectively.
There's no need to refile another homestead exemption whenever the exemption dollar amounts are adjusted.
On your insurance issue, a titleholder needs to understand that just because the board labels a particular expenditure "special assessment" does not mean it qualifies for a loss assessment reimbursement claim.
The special assessment must exceed the policy coverage limits pertaining to an existing covered loss on the association's insurance policy.
Although loss assessment coverage is not limited to maintenance issues, paying a claim is contingent on your insurance policy's description of what qualifies as a loss assessment.
For example, the association files a claim against the master policy but doesn't have the required $20,000 deductible, so the board specially assesses all owners for that money. Titleholders without loss assessment coverage would have to pay their share from their own funds.
Most insurance policies will not cover deferred maintenance no matter how catastrophic because it's something that should have been abated with adequate and timely due diligence.