Foreclosure of Equitable Lien on Florida Homestead

The Florida Supreme Court established in the Havoco case that  equitable liens are  an exemption from Florida’s homestead protection. A judgment creditor may be entitled to an equitable lien on the homestead for the amount of money obtained by fraud or other egregious actions a judgment and subsequently used to purchase or improve a homestead. The creditor my trace the money wrongfully obtained in to the debtor’s home.

One of my clients may be subject to a creditor action to obtain an equitable homestead lien for amounts of money obtained by civil fraud. The client wants to know whether a creditor with an equitable lien on a homestead property may force the sale of the property, or whether the equitable lien is passive so that the creditor may enforce the lien only when the debtor obtains money from the refinance or sale of the homestead. I’ve heard many attorneys express the opinion that an equitable lien on a homestead is a passive lien that cannot be foreclosed to force the sale of the property.

There are few legal decisions about the consequences of an equitable lien on a Florida homestead. The most recent decision I found states that a judgment creditor may foreclose an equitable lien on a Florida homestead. The case involved, not a fraudulent conversion, but a vendor’s lien given in equity to someone who provided money for the homeowner to refinance a mortgage. The court’s discussion about foreclosure applied to equitable liens in general. I see an equitable lien in the asset protection context as a court’s remedy to put the debtor in the status of a consensual mortgagor when the debtor acquires funds from a third party by fraud. The fraud victim is given status of the mortgagee in do equity.

Keep in mind that the creditor may recover from the forced sale of the homestead only the money invested that is traceable to the debtor’s fraud or egregious actions.

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