What is an equitable lien? An equitable lien is a device created by North Carolina courts to protect people whose money is wrongfully spent by someone else to improve that other person’s property. Courts can give the victim a right to be paid from the sale of the property. This right to payment attaches specifically to the wrongfully improved or purchased property.
FOR EXAMPLE, Andrew is Vicky’s power of attorney. Andrew wants to buy a new house, so he uses his power to take $50,000 from Vicky to help pay for it. However, Vicky never gave Andrew permission to take the money. Vicky now gets an equitable lien on the new house for $50,000. Vicky can have the court sell the new house and Vicky will be paid the amount of her lien out of the sale proceeds.
Equitable liens typically arise when the abuser has a fiduciary relationship with the victim. What is a fiduciary relationship? A fiduciary relationship exists when one person acts for the benefit of another person, causing that other person to place special faith, confidence, and trust in the person acting in her best interest. For example, trustees, powers of attorney, and executors all owe fiduciary duties to others. People who owe fiduciary duties to others are called “fiduciaries.”
Equitable liens are different from a typical money judgment against a fiduciary abuser. While a typical judgment gives the plaintiff a general right to payment, an equitable lien attaches to specific property. This means that the holder of the equitable lien must be paid the amount of her lien when that property is sold. Courts can order the property sold so the victim can be paid. If the property has already been sold, then the victim may get an equitable lien against the sale proceeds. This often makes an equitable lien more effective than a typical money judgment.
Equitable liens are also different from other remedies in fiduciary abuse cases, such as resulting and constructive trusts. Unlike trust remedies, an equitable lien does not allow the holder to possess the property, but instead gives her the right to be paid once the property is sold.
As a general rule, equitable liens are subject to a three-year statute of limitations. Abused parties often wait too long to file suit against their abuser even though they may have a strong equitable lien claim. Because of this, these abused parties are not able to assert the claim that gives them the greatest chance of success against their abusers. In some cases, the fiduciary relationship tolls the running of the statute of limitations.
Call Kirk Sanders to make an appointment to discuss your fiduciary litigation matter. Attorney Kirk Sanders at Hendrick Bryant Nerhood Sanders & Otis has experience dealing with equitable lien cases, trust litigation, and other estate litigation issues that arise in cases of fiduciary abuse. If you have a fiduciary abuse matter, contact the Fiduciary Litigation attorneys at Hendrick Bryant today at (336) 723-7200.
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Note: These are case specific driven legal matters. All cases are different. Results vary on a case by case set of facts.