What is a Lis Pendens in Real Estate? Your Expert Guide
A lis pendens, Latin for “suit pending,” is a public notice filed in the county land records informing potential buyers and lenders that a lawsuit has been filed concerning a property’s title or ownership. It essentially serves as a giant, flashing red light, warning anyone interested in the property that its ownership is in dispute and could be subject to the outcome of the litigation. Think of it as a legal placeholder, staking a claim until the court decides who rightfully owns or has a valid interest in the real estate.
Understanding the Nuances of a Lis Pendens
The primary purpose of a lis pendens is to protect the plaintiff (the party filing the lawsuit). Without it, the defendant (the property owner) could sell or mortgage the property to an unsuspecting third party, potentially complicating the lawsuit and jeopardizing the plaintiff’s chances of securing a favorable outcome. It provides constructive notice, meaning that even if a potential buyer or lender doesn’t actually know about the lawsuit, they are legally considered to be aware of it because the lis pendens is recorded in the public record.
How a Lis Pendens Works: A Step-by-Step Breakdown
Lawsuit Filing: The first step is the initiation of a lawsuit that directly affects the title or ownership of the real property. Common examples include disputes over boundary lines, foreclosures, partition actions (where co-owners disagree on how to divide a property), quiet title actions (to clear title defects), and specific performance lawsuits (where one party is trying to force the other to sell the property as agreed).
Lis Pendens Filing: Once the lawsuit is filed, the plaintiff’s attorney typically prepares and files a lis pendens with the county recorder or clerk’s office in the county where the property is located. The lis pendens includes key details such as the names of the parties, a description of the property (usually the legal description), and a reference to the court case number.
Public Record: The county recorder’s office indexes the lis pendens, making it part of the public record. Title companies, lenders, and potential buyers can then discover it during a title search.
Constructive Notice: From the moment the lis pendens is recorded, any subsequent purchaser or lender takes title or acquires an interest in the property subject to the outcome of the pending lawsuit. This means they could potentially lose their investment if the plaintiff wins the case.
Resolution or Release: The lis pendens remains in effect until the lawsuit is resolved (either through a settlement, judgment, or dismissal) or until the court orders its release. If the lawsuit is resolved in favor of the defendant, or if the plaintiff abandons the claim, the lis pendens should be released from the public record.
Why is a Lis Pendens Important?
A lis pendens is a powerful legal tool that can significantly impact a property’s marketability and value. Here’s why it’s so important:
Deters Buyers and Lenders: It serves as a significant deterrent, discouraging potential buyers and lenders from becoming involved with a property facing a title or ownership dispute. Most buyers and lenders will steer clear of properties encumbered by a lis pendens due to the inherent risks involved.
Protects the Plaintiff: It safeguards the plaintiff’s interests by preventing the defendant from transferring the property to a bona fide purchaser who might otherwise be shielded from the lawsuit’s outcome.
Clouds Title: It creates a cloud on the title, making it difficult to sell or refinance the property until the lawsuit is resolved or the lis pendens is removed.
Negotiating Leverage: It can give the plaintiff significant negotiating leverage in settlement discussions, as the defendant may be eager to resolve the lawsuit to clear the lis pendens and restore the property’s marketability.
Frequently Asked Questions (FAQs) About Lis Pendens
Here are 12 frequently asked questions to help you better understand the intricacies of a lis pendens:
1. What types of lawsuits justify filing a Lis Pendens?
A lis pendens is appropriate when the lawsuit directly involves the title or ownership of real property. This includes actions such as foreclosures, partition actions, quiet title actions, boundary disputes, specific performance lawsuits, and cases involving fraudulent conveyances. Lawsuits for monetary damages only, even if related to the property, typically do not justify a lis pendens.
2. Can a Lis Pendens be filed on any type of property?
Yes, a lis pendens can generally be filed on any type of real property, including residential homes, commercial buildings, vacant land, and even condominium units. The key requirement is that the underlying lawsuit must directly affect the title or ownership of the specific property in question.
3. How do I find out if a Lis Pendens has been filed on a property?
The easiest way to find out if a lis pendens has been filed on a property is to conduct a title search. This can be done through a title company or by searching the records at the county recorder’s or clerk’s office in the county where the property is located. A title search will reveal any recorded liens, encumbrances, and other matters affecting the property’s title, including any lis pendens.
4. What are the consequences of ignoring a Lis Pendens?
Ignoring a lis pendens can have serious consequences. If you purchase or lend money against a property with a lis pendens in place, you take title subject to the outcome of the pending lawsuit. If the plaintiff wins the lawsuit, you could potentially lose your investment or your ownership interest in the property. Due diligence is crucial.
5. How can a Lis Pendens be removed or released?
A lis pendens can be removed or released in several ways:
Resolution of the Lawsuit: If the lawsuit is resolved in favor of the defendant (the property owner), the plaintiff (or the court) will typically file a release of the lis pendens to clear the title.
Settlement: The parties may reach a settlement agreement that includes a provision for the release of the lis pendens.
Court Order: The defendant can file a motion with the court to have the lis pendens removed if they believe it is improperly filed or that the lawsuit lacks merit. The court may require the defendant to post a bond to protect the plaintiff’s interests.
Expiration: In some jurisdictions, a lis pendens may automatically expire after a certain period of time if the lawsuit is not actively pursued.
6. Can I sell my property if there’s a Lis Pendens filed against it?
Selling a property with a lis pendens is possible, but it can be challenging. Most buyers will be hesitant to purchase a property with a clouded title due to the uncertainty of the lawsuit’s outcome. If you do find a buyer, they will likely demand a significant discount to compensate for the risk involved. You must disclose the lis pendens to any potential buyer.
7. What is a “Bond to Discharge Lis Pendens”?
A bond to discharge lis pendens is a financial guarantee posted by the property owner (defendant) to the court. The purpose of the bond is to protect the plaintiff’s potential financial recovery if they win the lawsuit. In exchange for posting the bond, the court may order the lis pendens to be removed, allowing the property owner to sell or refinance the property without the clouded title.
8. Is it possible to file a Lis Pendens in bad faith? What are the consequences?
Yes, it is possible to file a lis pendens in bad faith, meaning without a legitimate legal basis or with the intent to harass or disrupt the property owner. Filing a lis pendens in bad faith can have serious consequences, including:
Legal Action: The property owner can sue the person who filed the lis pendens for damages, including attorney’s fees and costs.
Sanctions: The court can impose sanctions on the person who filed the lis pendens in bad faith, including fines and other penalties.
Disciplinary Action: If an attorney filed the lis pendens in bad faith, they could face disciplinary action from the state bar association.
9. How does a Lis Pendens affect a foreclosure proceeding?
In a foreclosure proceeding, the lis pendens serves as notice to any potential buyers that the property is subject to foreclosure. Anyone purchasing the property after the lis pendens is filed takes it subject to the foreclosure, meaning they could lose their investment if the foreclosure is successful.
10. What’s the difference between a Lis Pendens and a Lien?
A lis pendens is not a lien. A lien is a financial claim against the property, such as a mortgage or a mechanic’s lien. A lis pendens, on the other hand, is a notice of pending litigation that affects the title or ownership of the property. While a lien directly impacts the value of the property, a lis pendens primarily affects its marketability by creating uncertainty about its ownership.
11. Can a Lis Pendens be used to stop a real estate transaction?
Yes, a lis pendens can effectively stop a real estate transaction. Most buyers and lenders will be unwilling to proceed with a transaction involving a property encumbered by a lis pendens due to the risk of the lawsuit’s outcome affecting their investment. It is a powerful tool to halt transactions until the underlying legal issues are addressed.
12. What role does title insurance play when a Lis Pendens is involved?
Title insurance companies play a crucial role when a lis pendens is involved. They will identify any existing lis pendens during a title search. Title insurance policies generally exclude coverage for matters disclosed in the public record, including a lis pendens. This means that if you purchase a property with a lis pendens in place and later lose the property due to the lawsuit, your title insurance policy will likely not cover your losses. It underscores the need for a careful review of the title commitment before closing.
This comprehensive guide provides a clear understanding of what a lis pendens is in real estate, how it works, and its implications. Always consult with a qualified real estate attorney for specific legal advice related to your situation. The world of real estate law is complex, and professional guidance is invaluable in navigating these waters successfully.
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