NH Supreme Court Interprets Homestead Exemption Law

The Supreme Court of New Hampshire (the “Court”) recently interpreted its homestead exemption law in response to certified questions posed by the New Hampshire federal court in a bankruptcy case. In Brady v. Sumski, No. 2023-0023, (N.H. Aug. 17, 2023), the Court concluded that a spouse who occupies but has no ownership interest in a property cannot claim a homestead exemption separate and apart from that claimed by the spouse who does own the property. In doing so, the Court rejected arguments that amendments to the statute that clarified it applied to manufactured housing indicated that an ownership requirement only existed for that type of housing, even though manufactured housing was not at issue in the bankruptcy case at issue. 

In December 2021, Katherine Brady filed a chapter 7 bankruptcy petition. Although she lived in a single-family residence with her husband and children, only she held title to the property. She claimed a homestead exemption of $120,000 under RSA 480:1, and later amended her petition to add a similar exemption for her non-debtor husband. In March 2022, Brady converted her case to chapter 13, again seeking a homestead exemption on behalf of her spouse. Lawrence Sumski, the bankruptcy trustee in her chapter 13 case, objected to the spouse’s claimed exemption in the case, as had the chapter 7 trustee. 

New Hampshire’s homestead exemption statute, RSA 480:1, states that “[e]very person is entitled to $120,000 worth of his or her homestead, or of his or her interest therein, as a homestead.” It goes on to provide that the right exists in manufactured housing that is “owned and occupied as a dwelling by the same person” but not in the land under the manufactured housing if it is not owned by that same person.

In June 2022, the U.S. Bankruptcy Court for the District of New Hampshire interpreted RSA 480:1, noting its first sentence did not use the words ownership or occupancy. The bankruptcy court found the law limited the homestead exemption to a spouse who had both occupancy and ownership interests in the homestead property, but concluded the exemption was no more restrictive for manufactured housing than other housing. Because Brady’s husband did not own the property, Brady could not claim a homestead exemption on his behalf or claim that he possessed a lien securing an interest in the property.

On Brady’s appeal, the district court decided to certify two questions to the New Hampshire Supreme Court, which had “yet to address the nuanced issues presented in this case.” The two certified questions were: (1) whether under RSA 480:1 a non-owning, occupying spouse has a personal “present, vested, non-contingent homestead right” of $120,000 and (2) whether the ownership requirement of RSA480:1 applies only to manufactured housing occupied as a homestead or to all real property occupied as a homestead?

The Supreme Court began by noting the standard for its review, stating that interpreting the statute was a matter of law and that the plain and ordinary meaning of the text was key and would be considered in light of the overall statutory scheme. 

On the first question, Brady (joined by the State of New Hampshire as an intervenor) argued that a person who occupies the property has a present, non-contingent homestead right in the property owned by the person’s spouse. The trustee and an amicus curiae argued that a person must have an ownership interest in the property to claim a homestead exemption.

The Court concluded that its precedent and statutory history established that the homestead right requires both occupancy and ownership. Prior versions of the statute made clear that the exemption was available jointly to the owner and a non-owning spouse for the value set in the law. The Court rejected Brady’s argument that notices required to be provided under the statute indicated both spouses could claim the exemption regardless of ownership, concluding that the notice provisions did not create or define the homestead right, but simply delineated notice requirements for debtors and home occupants. Further, the Court distinguished caselaw that prohibited the waiver of a homestead right without consent of a non-owning spouse; the homestead law was intended to protect a non-owner spouse and dependent children, but the waiver provision does not address whether the non-owner spouse had a homestead right separate from that of the owner spouse. Likewise, RSA 480:3 merely sets the duration of the homestead right without addressing the nature of that right. That provision permits a non-owner spouse to occupy a homestead during the lifetime of the owner spouse and, if the owner spouse dies first, the non-owner spouse has the right to occupy the homestead for the rest of their lifetime.

Finally, the Court rejected arguments by Brady and the State that the statute provided a different homestead right for manufactured housing versus other types of housing. Having already concluded the first sentence of RSA 480:1 requires ownership to establish the homestead right, the Court refuted the contention that the subsequent sentences provided otherwise. Accordingly, the Court answered the first certified question in the negative, concluding that no homestead right exists without an ownership interest, while declining to reach the second question because the property at issue did not involve a manufactured home and thus that question was not determinative of the case at hand.  

News coverage of the opinion indicates the New Hampshire Attorney General intervened in the matter out of concern that more people may lose their homes if the homestead exemption is not available to both spouses. The New Hampshire Union Leader cited to an alert issued by the Attorney General’s office that the Supreme Court’s holding runs counter to what many believe the law says, which is that both spouses can claim the homestead exemption. Limiting the exemption to only the spouse listed on a deed means that many families may only be able to claim $120,000. With rapid growth in home values, the Attorney General’s Office fears that may lead to more family homes being sold to satisfy creditors, whether due to bankruptcy or lien attachments.

The Supreme Court’s opinion acknowledged that the state legislature is free to amend the statute if it disagrees with the Court’s decision. The Attorney General urged the legislature to accept the Court’s invitation and update the statute to clarify that both spouses can claim the homestead right so long as one is a title owner. As noted by a bankruptcy attorney in the Union Leader, the law is ripe for amendment, given that it originated in an era when women couldn’t vote or easily own property.

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