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Most people dealing with real property transactions have heard of a, lis pendens, but most of them don’t understand what they are, or how to use them properly.  When things go wrong, they often come to a lawyer and ask for a lis pendens to be filed against a piece of real estate.  Many times, even lawyers make serious mistakes by wrongfully recording a lis pendens against a property.  Let's see what a lis pendens is; how this tool can be used effectively to help someone with a real estate problem, and how it is frequently misused.

Lis Pendens is latin for Notice of Pending Litigation.  It means that a lawsuit has been filed in Court. A lis pendens gives the whole world Notice - that if anyone takes title to this property today, a Court may find later that someone else owns that property, and you could lose your money.  

The Notice tells you that a person has filed a lawsuit to recover that property from the person who currently holds what appears to be legal title.  If you are going to buy a piece of property, or receive it in exchange for something else, and you discover that a lis pendens has been recorded, it’s probably time to consult a real estate lawyer.  Even though you have purchased the property, if the person who filed the lawsuit wins their case, they will have superior rights to the property, and they will own it instead of you.  For this reason, Title Insurance Companies will not issue a title policy if a lis pendens has been recorded.

When is it proper to record a lis pendens?  (1) Only when a lawsuit has been filed, and (2) if the lawsuit is successful, the parties who filed the lawsuit will receive title to the property at the end of the lawsuit.  One example would be where someone was cheated into deeding their property to someone else by fraud.  While the fraud claim is being litigated, a lis pendens prevents other people from buying the property from the person who committed the fraud (so that the person who committed the fraud cannot run away with the money). After the fraud case is completed, the Court may issue an Order, which states that the fraudulent deed is void (has no legal merit), and qranting (quieting) title back to the person who was defrauded.  

When is it improper to record a lis pendens?  When a party suffers damages, but money would make them whole, a lis pendens is inappropriate.  The person filing the lawsuit MUST get title to the property if they win their lawsuit.  Otherwise, money would fix the problem, and you would not want to file a lis pendens.  California Courts frequently award sanctions against anyone who ties up someone else's property with a lis pendens, when that person will not get title to the property if they win their lawsuit.  

Here’s another example.  Let's say that you wrongfully record a lis pendens against my home, because you believe that I owe you money from a real estate commission.  While your lawsuit is going forward to recover your commission, I apply for a loan against my home, so that I can use the money to save my business, which really needs the cash right now to meet a deadline like paying off an existing loan.  So I apply to 4 different lenders and cannot get the loan against my home, because of your lis pendens being recorded against it.  My business loan comes due, and now I can't pay off the business loan solely because you interfered with my ability to get a home loan – by recording your wrongful lis pendens. You could be responsible for the damages I suffered (the loss of my million dollar business when I could not get that home loan). You caused me to suffer the caused by your wrongful conduct.  Most of the time, the damages are just the attorneys fees required to bring a Motion to expunge (remove) the lis pendens from the chain of title.

This article is not intended to be legal advice for your particular situation.  If you need legal advice on a real estate or business matter, feel free to contact our office for a free telephone consultation (949) 709-5800.