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When you are the victim of fraudulent conduct, is it possible to obtain an equitable lien on the fraudsters homestead in Florida? The answer is sometimes. Florida courts will impose an equitable lien on homestead when the wronged party can establish that the fraudsters have used fraudulently obtained funds to invest in, purchase or improve a homestead.
The rule in Florida that a homestead cannot be employed as an instrumentality of fraud has been restated by the Supreme Court of Florida in numerous cases to impose an equitable lien against homestead property. Once an equitable lien is imposed, the property can be sold and the proceeds applied in favor of the lien holder.
In order to obtain an equitable lien on Florida homestead, a plaintiff must establish by a preponderance of the evidence: (1) the existence of fraudulent or egregious conduct, and (2) the tracing of funds from that conduct to the purchase or improvement of the homestead. Where tracing funds is involved, a dollar for dollar accounting is not required, but the party challenging the homestead exemption has the burden of proving his case by a preponderance of the evidence.
It is important to note the commingling of fraudulent obtained funds with legitimately obtained funds does not defeat a claim for an equitable lien. However, Florida courts have created certain presumptions for tracing commingled funds. First, courts apply the “lowest intermediate balance rule,” which presumes that the person who controls the commingled funds will first dissipate his own funds, rather than those that were fraudulent obtained. Second, courts apply the replenishment rule, which presumes that when funds are replenished in a commingled account, the person who controls the commingled funds will first replenish any fraudulent obtained funds.
Please keep in mind that this information is being provided for educational purposes only. It is not designed to be complete in all material respects. If you have any questions relative to the contents of this post, please feel free to contact us.Contact Us
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