Priority of Sequential Charging Liens Against Same LLC Membership Interest
Florida Statute 605.0503 states that a charging lien is a judgment creditor’s sole remedy against a debtor’s membership interest in a limited liability company. The statute does not explain what happens if two judgment creditors apply for a charging lien against the same LLC interest. It is not clear whether the second charging lien has the right to share any LLC distributions captured by the charging lien.
A Florida appellate court decision considered a situation where two unrelated judgment creditors applied for charging lien against the same LLC interest of the same judgment debtor. The concurring opinion held that the first judgment creditor to obtain an enforceable charging order has priority, and any subsequent charging lien has not rights to share distributions, if any.
In a related opinion the same court found that a creditor’s lien obtained in a foreign jurisdiction, even if the foreign lien is directed against a Florida debtor’s specific LLC membership interest, cannot be enforced as a charging lien in Florida. Florida law states that a judgment creditor must apply to a Florida court to obtain a charging lien. A creditor holding a foreign judgment and a foreign judgment lien must domesticate the judgment in Florida and then apply for a Florida charging lien in order to establish its priority against the Florida LLC interest. A foreign court’s lien or order directed against a Florida debtor’s membership interest does not constitute a de facto charging lien enforceable in Florida.
Last updated on May 22, 2020
About the Author
Jon Alper is an expert in asset protection planning for individuals and small businesses.