Challenging a Fraudulent Transfer of Business Real Estate in Florida

If a business moved its building after a debt went unpaid, you may be asking whether that move can be undone. In Florida, a creditor can challenge a fraudulent transfer of business real estate under Chapter 726 of the Florida Statutes.

Courts look at the debtor’s intent, the price received, the timing of the move and who received the property. This guide explains those tests, the deadlines that matter and the records to keep now.

Who This Page Is For and What a Fraudulent Transfer Claim Is

A fraudulent transfer claim asks a court to undo a transfer that a debtor made to put property out of a creditor’s reach. A “transfer” includes any way a debtor parts with property, such as a sale, gift, lease or lien. § 726.102

Typical facts look like this:

• A company deeds its commercial building to a relative, a sister company or a manager for little or nothing.
• An LLC assigns its real estate to an affiliate shortly after a demand letter or lawsuit.
• A business owner moves property out of the company just before a large debt comes due.

A judgment is not always required. Florida’s definition of “claim” covers a right to payment whether or not it has been reduced to judgment. § 726.102

Ayala Law PA focuses on business litigation, including commercial and contract disputes, shareholder disputes, construction litigation, real estate litigation and international trade litigation. Our office is at 1646 W Snow Ave in Tampa, Florida. We handle matters for Tampa Bay and Hillsborough County businesses in Florida courts and arbitration.

How Chapter 726 Defines Actual and Constructive Fraud

Actual fraud turns on what the debtor intended. Constructive fraud turns on price and the debtor’s finances. A claim can rest on either test.

Actual fraud. A transfer is fraudulent if the debtor made it with actual intent to hinder, delay or defraud any creditor. § 726.105 Intent is usually shown through the surrounding facts, which is why the badges of fraud matter.

Constructive fraud. A transfer can be fraudulent without any intent to cheat. Under § 726.106(1), a transfer is fraudulent as to a creditor whose claim arose before the transfer if the debtor made the transfer without receiving a reasonably equivalent value in exchange and was insolvent at that time or became insolvent as a result of the transfer or obligation.

Business and debt tests. Under § 726.105(1)(b), a transfer without reasonably equivalent value can also be challenged. That applies when the debtor’s remaining assets were unreasonably small for the business it was in, or when it expected debts it could not pay as they came due.

Insider transfers. A transfer to an insider for an old debt has its own rule. Under § 726.106(2), a transfer to an insider for an antecedent debt is fraudulent as to a creditor whose claim arose before the transfer was made if the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent. Insiders include relatives, officers and managing agents. § 726.102

A small price, or no price, draws the closest look. Each sale is judged on its own facts, including what the debtor actually received.

The Badges of Fraud Courts Look At

Badges of fraud are facts a court may weigh when it decides whether a debtor acted with intent to hinder or defraud. The statute lists them as factors a court may consider. Each dispute turns on its own facts. § 726.105(2)

Common badges include:

• Insider buyer. The transferee was a relative, officer or affiliated entity.
• Debtor kept control. The debtor kept collecting rent, paying expenses or using the building.
• Secrecy. The transfer was disclosed or concealed.
• Timing around a lawsuit. The debtor had been sued or threatened with suit beforehand.
• Most of the assets. The transfer moved substantially all of the debtor’s assets.
• Insolvency. The debtor was insolvent or became insolvent shortly after the transfer.
• Timing around debt. The transfer came shortly before or after a substantial debt.
• Weak value. The consideration was not reasonably equivalent to the property’s value.

Owners often assume a recorded deed settles the question. It does not. The deed shows that a transfer happened. The badges help show why it happened.

Remedies: Avoidance, Levy, Injunction and Protecting the Property

A creditor who proves a fraudulent transfer can ask the court to set the transfer aside. That relief reaches only as far as needed to satisfy the creditor’s claim. § 726.108

Other tools include:

• Provisional remedies against the transferred asset, as allowed by law.
• An injunction against further sale or transfer of the property while the case goes on.
• A receiver to take charge of the asset or other property of the transferee.
• Execution on the property or its proceeds, if a creditor has a judgment and the court so orders.

Under Florida law, lands, equities of redemption and stock in corporations can be levied and sold under execution. § 56.061 Under this section, lands and tenements, goods and chattels, equities of redemption in real and personal property, and stock in corporations are subject to levy and sale under execution. § 55.10 addresses judgments, orders and decrees of record that constitute a lien on real property. Fla. Stat. § 55.10 reads: “(4) This act shall apply to all judgments, orders, and decrees of record which constitute a lien on real property; except that any judgment, order, or decree recorded prior to July 1, 1987, shall remain a lien on real property until the period provided for in s. 55.081 expires or until the lien is satisfied, whichever occurs first.”

Going after owners personally is harder. Section 55.10 covers judgments, orders and decrees of record that constitute a lien on real property and does not address veil piercing; for when Florida courts pierce a corporation’s veil, see Wurtzebach v. Flooring Depot. Wurtzebach v. Flooring Depot

Deadlines and Defenses a Transferee May Raise

Florida sets firm time limits, and the deadline depends on which claim you bring. If you miss it, the claim is extinguished. § 726.110

• Actual-intent claims: within 4 years after the transfer or, if later, 1 year after the claimant discovered or reasonably could have discovered it.
• Value-based claims: within 4 years after the transfer or obligation.
• Insider debt claims under § 726.106(2): a transfer made to an insider for an antecedent debt is fraudulent as to an earlier creditor if the debtor was insolvent and the insider had reasonable cause to believe it. Such claims must be brought within 1 year after the transfer under § 726.110(3).

The shortest window is one year. Record dates and discovery dates matter from the start.

A transferee will often argue it paid fair value or that the property was not the debtor’s asset. Florida does not count property as an asset to the extent a valid lien covers it. § 726.102 So the equity above a valid lien is often the number that matters. Each argument turns on documents.

Evidence to Preserve Now

Preserve the deed, the money trail and the entity records as soon as you suspect a transfer.

• Recorded deeds and any quitclaim or warranty deed, with recording dates from the county official records.
• Closing or settlement statements showing the price, payoffs, liens and who received the money.
• Entity records, including articles, annual reports and lists of members and managers. An LLC must keep a current list of its members and managers. § 605.0410
• Member records. In a member-managed LLC, a member may inspect and copy company records on reasonable notice. § 605.0410
• Bank statements, wire confirmations and tax returns showing where the proceeds went.
• Leases, rent rolls and property tax bills showing who used the building and paid for it after the transfer.
• Emails, texts and letters about the transfer, the debt or the lawsuit.

Keep originals. Don’t edit or discard files. Talk with counsel before you confront the other side about the transfer.

What to Expect: Steps, Timeline and Why Ayala Law PA

The usual path starts with a document review. It then moves to demand letters or a filing. The timeline depends on the court and the case.

1. Intake and document review. We look at the debt, the transfer, the parties’ relationships and the records you have.
2. Legal assessment. We test the transfer against the actual and constructive fraud rules and the badges of fraud.
3. Pre-suit steps. Where appropriate, we send demand letters or preservation letters.
4. Filing. An action is brought only in the county where the defendant resides, where the cause of action accrued or where the property in litigation is located, but this rule does not apply to actions against nonresidents. § 47.011 For property in Hillsborough County, the property’s location is one option to weigh.

Eduardo A. Maura is the responsible lawyer for this page. Ayala Law PA’s office is at 1646 W Snow Ave in Tampa, Florida. Some matters may be referred to another lawyer or firm, and we will tell you if that applies. Fee arrangements are explained when you contact us.

Common Questions About Transfers of Business Property

Most questions come down to whether the creditor has a claim and how fast it must be filed.