Most claimants assume nothing can be done to secure payment against a defendant’s property unless they have a written note and mortgage, or followed statutory lien procedures, such as the provisions of Florida’s Construction Act governing construction liens. As a general proposition, that is correct. But the devil is in the details, and older, common law remedies are available far more often than most litigants realize.

What an equitable lien is.

An equitable lien is a charge a court imposes on a specific piece of property to secure an obligation. No statute creates it. No recording deadline governs it. It exists because a court of equity concludes that the property itself, and not merely the person, should answer for the debt. It often does not require a contract, only that the owner received a benefit from the claimaint in connection with the property, and that keeping the benefit without paying for it would be unjust.

Who it reaches.

The doctrine belongs to no single industry. The recurring pattern is simple. The claimant's money or labor went into a specific asset, and the person holding title to that asset either does not owe the debt or does not intend to pay it. Situations that come up repeatedly include:

• Funds advanced for a purchase, or to pay off a mortgage, on property titled in someone else's name.

• A lender whose payoff money discharged an existing mortgage but whose own mortgage was never validly recorded.

• Capital contributed to a venture that a partner or manager placed into real estate held by an entity the contributor does not control.

• Money taken by a fiduciary and traced into the purchase of an identifiable asset.

• Improvements furnished to property under a contract signed by someone other than the record owner.

• A relative who funded a home on the understanding that title would follow, and it never did.

A dispute that fits one of those shapes is worth analyzing for an equitable lien early, before the asset is transferred.  

The lis pendens is the leverage.

The lien is the remedy, but the notice of lis pendens is what gives it force. Section 48.23, Florida Statutes, permits a party asserting a claim against specific real property to record notice that the action is pending. Once it is recorded, anyone who buys the property or lends against it takes subject to the outcome of the case. As a practical matter, title underwriters will usually not insure it. The asset cannot be sold clean and cannot be refinanced. A closing scheduled for next week does not happen.

The limit courts enforce.

Where a lis pendens is not founded on a duly recorded instrument or a statutory lien, it remains subject to the court's control. The claimant must show a “fair nexus” between the property and the dispute, and the court may condition the notice on a bond.

A claim for money that happens to involve real property will be discharged. A claim that the property itself should answer for the obligation will survive. Defendants moving to discharge notices of lis pendens every time, and defending the notice  takes more than reciting the standard. It requires pleading the claim correctly and understanding how courts apply the law in this context.

A recent example.

This summer, FORS lawyers were able to defend and maintain a Notice of Lis Pendens for a general contractor who performed work at a multi-million property, against the owners who refused to pay the balance of their bills. Initially, it was thought that the contractor could not impose a lien because it had not complied with the statutory lien framework set forth in Florida’s Construction act; however, Fors attorneys were able to establish that the statutes did not apply because, as FORS’ investigation revealed, the party who signed the contract was, legally, not the party who owned the property. Revealing that mismatch, FORS was able to argue that its client was entitled to an equitable lien, because the titleholder received a benefit that had been physically built into the property, and FORS’ client did not have a contract with the titleholder.

When FORS pleaded an equitable lien against the titleholder as security for the unjust enrichment claim and recorded a notice of lis pendens. The property was under contract to sell for $6.8 Million, with a closing days away. The defendants moved on an emergency basis to discharge the notice and dismiss the equitable counts, and demanded a bond measured against the sale price. But FORS prevailed, the notice was maintained, and the claims were resolved before the closing.

Why it is worth raising early.

Equitable liens are rarely litigated on an ordinary schedule. The motion to discharge arrives within days, tied to a closing date, with a bond demand attached. The theory has to be right in the complaint, and the response to a Motion Discharge must be strong and compelling, because there is seldom time to repair it afterward.

FORS has litigated a multitude of equitable lien and lis pendens disputes through emergency discharge proceedings, obtaining equitable liens in the area of construction, at trial against multi-million dollar Miami condominium units to secure assets a business partner transferred to offshore entities, against a former romantic partner, and between lenders who simply failed to properly document a note and mortgage.

Prospective clients may not obtain similar results. This article is general information about Florida law and is not legal advice.