Furst v. Rebholz

• Decision Date: 19 June 2020
• Docket Number: Case No. 2D18-3323
• Citation: 302 So.3d 423
• Parties: Bill FURST, as Property Appraiser of Sarasota County, Florida; and Jim Zingale, as Executive Director of the State of Florida Department of Revenue, Appellants, v. Rod REBHOLZ, AS TRUSTEE OF the ROD REBHOLZ REVOCABLE TRUST; and Barbara Ford-Coates, as Tax Collector of Sarasota County, Florida, Appellees.
• Court: Florida District Court of Appeals

302 So.3d 423

Bill FURST, as Property Appraiser of Sarasota County, Florida; and Jim Zingale, as Executive Director of the State of Florida Department of Revenue, Appellants,

v.Rod REBHOLZ, AS TRUSTEE OF the ROD REBHOLZ REVOCABLE TRUST; and Barbara Ford-Coates, as Tax Collector of Sarasota County, Florida, Appellees.

Case No. 2D18-3323

District Court of Appeal of Florida, Second District.

Opinion filed June 19, 2020

J. Geoffrey Pflugner, Jason A. Lessinger, Anthony J. Manganiello, III, and Mark C. Dungan of Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., for Appellant Bill Furst, Property Appraiser of Sarasota County, Florida.

Ashley Moody, Attorney General, and Robert P. Elson, Senior Assistant Attorney General, Revenue Litigation Bureau, Tallahassee, for Appellant Jim Zingale, as Executive Director of the Florida Department of Revenue.

No appearance for Appellee Barbara Ford-Coates, as Tax Collector for Sarasota County.

Sherri L. Johnson of Johnson Legal of Florida, P.L., Sarasota, for Appellee Rob Rebholz.

Loren E. Levy and Stuart W. Smith of The Levy Law Firm, Tallahassee, for Amicus Curiae, The Property Appraisers’ Association of Florida, Inc.

SLEET, Judge.

Bill Furst, Property Appraiser of Sarasota County, and Jim Zingale, Executive Director of the Florida Department of Revenue (Appellants),¹ appeal the final judgment reinstating the homestead tax exemption set forth in the Florida Constitution on 100% of Rod Rebholz's residence for the years 2004 to 2011 and 2013, during which he rented two bedrooms in his home to tenants. The final judgment also required a refund to Rebholz of the amount of the tax lien imposed by Appellants for those same years and declared section 196.012(13), Florida Statutes (2004-2011, 2013)² , unconstitutional as applied to Rebholz's single-family residential home. Because the Florida Legislature has not authorized the removal of the constitutional homestead exemption from a portion of a homeowner's permanent residence for renting space within the home to residential tenants, we affirm the portion of the final judgment retroactively reinstating Rebholz's homestead exemption on 100% of his residence and awarding him a refund for taxes improperly paid. However, because section 196.012(13) is not applicable in this case, the trial court erred in addressing the constitutionality of the statute, and we must reverse that portion of the final judgment.

I. FACTS

The facts of this case were undisputed below. At all times at issue, Rebholz was the sole owner of his home and used it as his permanent residence. The first floor of the two-story home consisted of Rebholz's master bedroom, a living room, and a kitchen, and the second floor was comprised of a laundry room and four bedrooms, each with a lockable door and an internal bathroom. In 1996, pursuant to article VII, section 6(a), of the Florida Constitution, Rebholz applied for and received a homestead exemption on 100% of his residence, and he continued to receive the full exemption through the 2014 tax year. During that time, the property appraiser continuously classified the home as an owner-occupied residential property.

In late 2014, the property appraiser received a complaint about Rebholz and discovered that he was renting one of his upstairs bedrooms to a tenant who had been renting the room since March 1996 and that another upstairs bedroom had been rented sporadically during that same period. On September 24, 2014, the property appraiser sent a letter to Rebholz advising him that he may have improperly received the 100% homestead exemption from 2004 through 2013. Citing section 196.012(13), the property appraiser asserted that Rebholz's rental of the two bedrooms was a commercial use which rendered fifteen percent of his residence ineligible for the homestead tax exemption.

Thereafter, the property appraiser divided Rebholz's home for taxing purposes into eighty-five percent homestead property and fifteen percent commercial-use property. The property appraiser retroactively removed the homestead exemption on the fifteen percent it deemed commercial use. On November 6, 2014, the property appraiser recorded a tax lien against Rebholz's residence in the amount of $7023.87 to recover taxes it claimed Rebholz should have paid on fifteen percent of his residence for the years 2004 through 2011 and 2013.³

Rebholz satisfied the lien in order to stop the accrual of interest, but he subsequently filed suit, seeking a refund of the retroactive taxes he paid. Rebholz's two-count amended complaint alleged unlawful tax lien and sought a declaratory judgment finding section 196.012(13) unconstitutional.

On July 30, 2018, the parties proceeded to nonjury trial at which Appellants admitted the deposition testimony of two of Rebholz's tenants. Tenant Michael Beaumont testified that he had lived in one of the upstairs bedrooms since 1996 and paid rent of $400 a month. When he first moved in, he signed a twelve-month lease, but after the first year, he continued to live there without a written lease. Rebholz frequently traveled for months at a time and gave Beaumont "a break on the rent" in exchange for Beaumont's paying the bills, mowing the lawn, and generally watching the home. Beaumont recalled only eight or nine other tenants who rented Rebholz's other bedrooms for a few months at a time during the years 1996 to 2014. According to Beaumont, the tenants shared a common kitchen, laundry room, and mailbox; regularly socialized with Rebholz in the main living area; and used the downstairs front door to enter the house and access their upstairs bedrooms. He further testified that both he and Rebholz had a key to the lock on his bedroom door.

Tenant Karl Krause testified that he lived in one of Rebholz's upstairs bedrooms on two occasions—for six to eight months in 2011 and for about six months in 2014. According to Krause, Rebholz's relatives would visit often and stay in the other upstairs bedrooms. Krause paid rent of $500 a month. On both occasions that he lived with Rebholz, Krause signed a written lease, but no minimum stay was required. He also testified that Rebholz retained a key to his bedroom door. Krause moved out in 2014.

Sarasota County Deputy Property Appraiser Kathleen Reardon testified at the hearing that she was the member of the property appraiser's office who made the ultimate determinations that fifteen percent of Rebholz's home was being used for a commercial purpose and that the homestead tax exemption had to be retroactively removed from that portion of the residence. Reardon never visited Rebholz's home but based her decision in part on information gathered by a department appraiser who made physical inspections of the property. Based on the information she received from the appraiser, Reardon initially determined that possibly seventy to seventy-five percent of the residence could be nonexempt due to commercial use. She then spoke to Rebholz on the phone and later met with him and his attorney. Rebholz told her that most of the upstairs of his home was used for storage except for one bedroom that was used by his son when he visited and the other bedroom that had been rented by a tenant for years. After receiving this information, Reardon concluded that only fifteen percent of Rebholz's home was used for a commercial purpose. At no time did she offer a formula or other procedure by which the commercial-use percentage of the home was determined. But Reardon did confirm that Rebholz's residence had continuously been classified as owner-occupied residential property since 1996.

The trial court entered final judgment in favor of Rebholz, concluding that "Florida law does not authorize the Property Appraiser to deny a homeowner his constitutional homestead exemption for a room rented within his residence while he simultaneously maintains the property as his permanent residence." With regard to Rebholz's constitutional challenge of section 196.012(13), the court concluded that the section was unconstitutional as applied because it "exceed[s] the authority of the [l]egislature [by] impos[ing] an additional substantive restriction [on] the constitutional right to a homestead exemption." This appeal ensued.

II. ANALYSIS

On appeal, Appellants argue that the trial court erred in entering final judgment in favor of Rebholz. Appellants maintain that chapter 196 authorizes the division of property—including a person's permanent residence—for taxation purposes based on the ownership and actual use of the property. Appellants argue that by renting bedrooms with lockable doors, Rebholz completely surrendered his right to occupy and possess that part of his residence and thus transformed it into a place of business. Appellants further argue that Rebholz's use of that portion of his home for commercial purposes allowed the property appraiser to divide Rebholz's home into exempted homestead property and commercial-use property, retroactively remove the tax exemption from the commercial-use portion, and require Rebholz to pay back taxes. We disagree. The Florida Constitution and Florida law do not authorize such a division of a homeowner's permanent residence with respect to ad valorem taxation and the homestead exemption.

Florida's homestead tax exemption originates from article VII, section 6(a), of the Florida Constitution, which provides that "[e]very person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, or another legally or naturally dependent upon the owner, shall be exempt from taxation thereon ...." (Emphasis added.) This provision is codified in chapter 196, Laws of Florida. See § 196.031(1)(a) ("A person who ... has the legal title or beneficial title in equity to real property in this state and who in good faith makes the property his or her permanent residence or the permanent residence of another or others legally or naturally dependent upon him or her, is entitled to an...