HOUSE BILL REPORT

                  HB 1233

                    As Passed Legislature

Title:  An act relating to the net value of a homestead exemption.

Brief Description:  Determining the net value of a homestead exemption.

Sponsors:  Representatives Edmonds, Sheahan and Constantine.

Brief History:

  Committee Activity:

Judiciary:  2/4/99, 2/16/99 [DP].

Floor Activity:

Passed House:  2/26/99, 96-0.

Senate Amended.

Passed Senate:  4/13/99, 48-0.

House Concurred.

Passed Legislature.

                 Brief Summary of Bill

$Clarifies that net value of a homestead is calculated at the time a judgment is executed.

$Clarifies that the judgment being executed is excluded from the calculation of net value.

$Increases the maximum amount of the homestead exemption from $30,000 to $40,000

HOUSE COMMITTEE ON JUDICIARY

Majority Report:  Do pass.  Signed by 12 members:  Representatives Carrell, Republican Co-Chair; Constantine, Democratic Co-Chair; Hurst, Democratic Vice Chair; Lambert, Republican Vice Chair; Cox; Dickerson; Esser; Kastama; Lantz; Lovick; McDonald and Schindler.

Staff:  Bill Perry (786-7123).

Background:

A homestead, the property an owner uses as a residence, is exempted from attachment, execution, and forced sale for the debts of an owner up to $30,000.  Judgments against a homestead owner that are greater than $30,000 become liens on the value of the homestead in excess of the homestead exemption.  In order to execute against the homestead, the judgment creditor must apply to the superior court of the county where the homestead is located for the appointment of an appraiser.  The application for an appraiser must show:  (1) an execution has been levied upon the homestead, (2) the name of the owner of the homestead property, and (3) that the net value of the homestead exceeds the amount of the homestead exemption.  Net value is defined as market value less "all liens and encumbrances."  The time at which net value should be calculated is not specified.

In Robin Miller Construction Co. (RMC) v. Coltran, a 1997 Washington Court of Appeals case, the questions of whether a judgment could be executed against a homestead turned on the time at which the net value of the homestead was calculated.  If the net value was calculated at the time the judgment was recorded, the net value would exceed the homestead exemption.  If the net value was calculated at the time the judgment was executed, the net value would not exceed the homestead exemption, due to additional encumbrances incurred by the owner after the judgment was recorded.  The court of appeals affirmed the trial court decision to calculate net value at the latter time.  The court interpreted the phrase "all liens and encumbrances" in the homestead law to include encumbrances incurred after the judgment was recorded, as well as the specific judgment being executed.

Summary of Bill:

Net value of a homestead is calculated at the time the judgment is executed.  All liens and encumbrances that are senior to the judgment being executed upon are included in the calculation.  That is, these senior liens and encumbrances will be used to reduce the net value available for the judgment creditor.   However, the specific judgment being executed is excluded from the calculation.

The maximum amount of the homestead exemption is increased from $30,000 to $40,000

Appropriation:  None.

Fiscal Note:  Not requested.

Effective Date:  Ninety days after adjournment of session in which bill is passed.

Testimony For:  The Coltran decision was a literal reading of the statute, but it makes no practical sense.  The bill clarifies that the law will operate as intended and as practitioners had assumed it did for many years.

Testimony Against:  None.

Testified:  Charles Helm and Dan Brink, Washington State Bar Association.