FC section 2033 - "Attorneys Real Property Lien"


CAL Family Code Section 2033:

What Is A F-L-A-R-P-L?

Family Code section 2033 provides one way to access the money needed to retain an attorney in a family law proceeding, or to assure continued representation after a party has exhausted the available liquid funds needed to pay attorney fees. A client can grant their lawyer a FLARPL - or "Family Law Attorney Real Property Lien." In some respects it is like placing a mortgage or line of credit on real property. If there is sufficient equity in a home, condominium, vacant land or commercial real estate some attorneys will agree to work now in the expectation that they will be paid later, so long as they have a security interest that protects the fees they earn. The involved real estate is being encumbered and not sold to the attorney, and its purpose is not to have the attorney wind up owning your valuable assets but instead to assure a source of payment if all else fails. Indeed, divorce lawyers are not trying to leverage themselves into stealing your hard-earned assets - but it could feel that way.

Lawyers hate FLARPLs. They are a big hassle with a number of rules and procedures that must be followed exactly, and by their nature they create of conflict of interest between the attorney and client that, at a minimum, can drive of wedge between them and become a source of suspicion and distrust. Clients panic when they think that if they default on the obligation to pay their attorney that he or she may foreclose them out. Ironically though, and at least for me, the only clients for whom I would even consider using one are the ones that I trust and respect the most. I wouldn't dream of entering into what equates with an economic partnership of sorts with any client that was highly litigious, reactive, narcissistic or a bad risk for any number of reasons. When I do consider them at all, it is because I really, really care about that client's circumstances and I know that if I otherwise have to withdraw from the case, they will be ruined by the other side; I also recognize that any client that gives me a lien upon their home cannot help but resent it.

Where the property to be secured belongs to the community estate, the client can only hypothecate their one-half interest and not the half belonging to the other spouse. This means that in order for a FLARPL to provide the attorney meaningful protections that he will be paid, there must be substantial equity relative to any pre-existing mortgages or other secured loans because the client only has one-half the net value to offer up. Usually the question of using a FLARPL only arises once fees have grown to become a big number. Obviously a family attorney is much more likely to be willing to accept one if the property is free and clear, but that is rarely the case. If its fair market value isn't significantly greater than the amounts owing senior lenders, it isn't going to be a tool that works.

Sometimes the home or building that might secured the FLARPL is itself a hotly contested issue in the case in terms of whether it is properly characterized as community or separate property. Again, in those situations, it is not a viable solution. The other party is entitled to object as described in Family Code section 2034 to one spouse encumbering the property. Again, only the one client's interest in the property is directly affected but once a FLARPL is recorded with the County Recorder's office it becomes a lien like any other, and that can cloud title and adversely affect marketability. Few litigants will feel warmly about the other spouse's attorney effectively gaining a deed of trust on one of their assets. Still, even if the other spouse or domestic partner objects and requests a court hearing to challenge the allowing the FLARPL to take hold, most family court judges will approve them.

In over thirty years of practicing divorce and family law I have used a FLARPL only once, and only a few of my colleagues have reported ever employing them to me. A couple who have asked me about my thoughts concerning them have complained about how difficult they can be to enforce. One in particular got stuck holding a couple before the real estate market imploded, which therefore become utterly worthless. If the property is lost through foreclosure or non-judicial sale to a senior encumbrancer, kiss the security good bye.

The device created by Family Code section 2033 is a remedy of last resort, and makes sense only on a very small fraction of my high-conflict litigation cases.


Family Code section 2033

(a) Either party may encumber his or her interest in community real property to pay reasonable attorney's fees in order to retain or maintain legal counsel in a proceeding for dissolution of marriage, for nullity of marriage, or for legal separation of the parties. This encumbrance shall be known as a "family law attorney's real property lien" and attaches only to the encumbering party's interest in the community real property.
(b) Notice of a family law attorney's real property lien shall be served either personally or on the other party's attorney of record at least 15 days before the encumbrance is recorded. This notice shall contain a declaration signed under penalty of perjury containing all of the following:
(1) A full description of the real property.
(2) The party's belief as to the fair market value of the property and documentation supporting that belief.
(3) Encumbrances on the property as of the date of the declaration.
(4) A list of community assets and liabilities and their estimated values as of the date of the declaration.
(5) The amount of the family law attorney's real property lien.
(c) The nonencumbering party may file an ex parte objection to the family law attorney's real property lien. The objection shall include a request to stay the recordation until further notice of the court and shall contain a copy of the notice received. The objection shall also include a declaration signed under penalty of perjury as to all of the following:
(1) Specific objections to the family law attorney's real property lien and to the specific items in the notice.
(2) The objector's belief as to the appropriate items or value and any documentation supporting that belief.
(3) A declaration specifically stating why recordation of the encumbrance at this time would likely result in an unequal division of property or would otherwise be unjust under the circumstances of the case.
(d) Except as otherwise provided by this section, general procedural rules regarding ex parte motions apply.
(e) An attorney for whom a family law attorney's real property lien is obtained shall comply with Rule 3-300 of the Rules of Professional Conduct of the State Bar of California.

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