What is Arizona’s Homestead Exemption?

A homestead means a dwelling in which a person resides. The dwelling may be a house, condominium, or mobile home. A person’s homestead is exempt from attachment, execution and forced sale by creditors, up to $400,000. Here are the rules pertaining to the state’s homestead exemption (based on Proposition 209 approved by voters in November 2022 and which went into effect on December 5, 2022).

The Basic Rules

The homestead exemption is available to any adult (18 or over) who resides within the state. Only one homestead may be held by a married couple or a single person. The value of the homestead refers to the equity of a single person or married couple. Equity is calculated by subtracting all liens and encumbrances from the fair market value of the homestead property.

Illustration: If the fair market value of the homestead property is $650,000 and the mortgage balance is $400,000, the value of the homestead, or equity, is $250,000.

If a married couple lived together in a homestead property and are then divorced, the total exemption allowed for that residence to either or both persons cannot exceed $400,000 in value.

A homestead property may be any one of the following:

1. Property in one compact body upon which exists a dwelling house
2. One condominium or cooperative
3. A mobile home, or
4. A mobile home plus the land on which it is located

The key is that the person claiming the homestead must reside in the structure to which the exemption applies.

If a homestead property is sold, the exemption automatically attaches to the sale proceeds, up to the value permitted by law (see above discussion). The homestead exemption in identifiable cash proceeds continues for 18 months after the sale of the property or until the person establishes a new homestead with the proceeds, whichever period is shorter. A person may hold only one homestead exemption at a time.

The homestead exemption will be adjusted annually beginning on January 1, 2024, and thereafter on January 1 of each successive year by the increase in the cost of living.

Other Rules

A person who is entitled to a homestead exemption holds the exemption by operation of law and no written claim or recording is required. (Under prior law, a declaration of homestead had to be recorded. This is no longer required.)

If a person has more than one property to which a homestead exemption could reasonably apply, a creditor may require the person to designate which property is protected by the homestead exemption. In those cases, the debtor must designate the property by recording a homestead exemption in the office of the county recorder where the property is located or by sending the creditor a certified letter, return receipt requested, within 30 days after receiving the creditor’s demand letter.

A person’s homestead is exempt from process and from sale under a judgment or lien, except:

1. A consensual lien (such as a mortgage or deed of trust)
2. A mechanic’s or material man’s lien
3. A lien for child support arrearages or spousal maintenance arrearages, or
4. To the extent that a recorded civil judgment or other nonconsensual liens may be satisfied from the equity of the debtor exceeding the homestead exemption (i.e., equity in excess of $400,000).

Illustration: A person contracts to have work done on his homestead, and a mechanic’s lien is legally filed against the property for an unpaid balance. Regardless of the homestead exemption, the property will not be exempt from foreclosure of the lien.

A homestead may be abandoned by a declaration of abandonment or waiver, a transfer of the homestead property, or a permanent removal of the person from the residence or the state. A person may remove from the homestead for up to two years without abandonment or a waiver of the exemption.

The transfer of homestead property into a living trust does not constitute an abandonment of the homestead, so long as the person retains the power to administer and revoke the trust.

Homestead laws vary from state to state. Arizona’s homestead laws provide substantial protection to homeowners against the claims of creditors.