What is an Equitable Lien?

Equitable Liens in Litigation

You may be surprised to learn that a court can impose a lien over property even when there is no written or special contract between the parties.  This type of lien is known as an “equitable lien” and it arises out of fundamental maxims of fairness-as opposed to an express contract.  In deciding whether to declare the existence of an equitable lien, a court will first analyze the relationships of the parties and the circumstances of their dealings with one another.  If the court finds that a party’s request for the imposition of an equitable lien is rooted in principles of unjust enrichment or estoppel, then the court may impose such a lien.  

So what are some situations where courts have imposed Equitable Liens?

In Florida, equitable liens are used to provide a cure for situations where there is either an absence of an available lien or no adequate remedy at law.  The following are examples where courts have imposed example liens:

-a complaint for an equitable lien was found to exist where party purchased a home with funds obtained via fraud.

– an equitable lien was found to exist where a mortgage loan encumbering a home was paid off by a third party with expectation of repayment.

– an equitable lien was found to exist where funds of a creditor were used to purchase materials and services for improvement of the defendant’s home.

And what are some situations where courts have refused to impose Equitable Liens?

An equitable lien is an extraordinary remedy that will only be applied by a court when there is no adequate remedy at law and justice would not occur without the imposition of said lien.  Below are some examples where courts have refused to impose equitable liens:

-court refused to impose equitable lien where contract between would-be purchaser and condominium developer stated that “[n]either this Agreement, nor Buyer’s payment of deposits, will give Buyer any lien or claim against the Unit, the

Condominium or the real property upon which the Condominium is being developed.”

-court refused to impose equitable lien where solely contractual services were performed in connection with the sale of real property.

-court could not impose an equitable lien on home as a sanction

against its owner for his failure to follow numerous court orders requiring him to cure municipal code violations.

Although equitable liens may be necessary in the absence of similar remedies in law, they are often abused by overzealous and greedy plaintiffs. 

This is because unlike the imposition of a constructive trust, the imposition of an of an equitable lien does not require a plaintiff prove any kind of fraud, egregious behavior, or reprehensible conduct on the part of the defendant.  

There is nothing more worrisome that being sued for an equitable lien on your home.  Call Ormond Beach trial lawyer Andrew J. Pascale when you are ready to discuss your case. This blog does not constitute legal advice and is for illustrative purposes only.