What is a Lis Pendens?

From the Ask the Broker inbox:

I’ve put an offer in on a home and found out it has a “Lis Pendens” on it. I asked my agent what that meant and she didn’t know. Can I still buy this house?

I’ll resist the temptation to say, “find a new agent”.  If you’re under contract, it’s a little too late for that.

Lis pendens is Latin for “suit pending”. The book definition is:

Lis pendens is a written notice that a lawsuit has been filed which concerns the title to real property or some interest in that real property. The lis pendens (or notice of pending action) is filed with the clerk of the court, certified that it has been filed, and then recorded with the County Recorder. This gives notice to the defendant who owns real estate that there is a claim on the property, and the recording informs the general public (and particularly anyone interested in buying or financing the property) that there is this potential claim against it. (source)

So what does this mean in English and what does it mean to a potential real estate buyer?

In a nutshell, if there has been a lis pendens filed, someone is saying, “Hey, I have a piece of this property and you can’t have it.” They may (think) they own all or part of it, or they may have a lien against it and they have (or are about to) file a law suit stating their claim.

Now whether or not this claim is true may, or may not, be a different story. That will be up to the court to decide.

A lis pendens will place a “cloud” on the title that will have to be cleared before you can take title to the property. I haven’t met a title company yet that will issue title insurance if a lis pendens has been filed. They can’t, as they don’t know if the title will be clear to transfer to you, the prospective buyer.  No title insurance, no loan.

Now this isn’t to say that a lis pendens will prevent the purchase of a property, but it will have to be resolved. In these days of frivolous litigation, many of these things just fall apart as they progress through the system, the lawsuit is dropped, and the lis pendens is removed. If you are a cash buyer, and for some ridiculous reason decide you don’t want title insurance, a lis pendens won’t prevent a sale. Just be aware that should the reason for the lis pendens be true, you may not be able to take title or you may have to cough up more money to satisfy a lien holder.

What are some reasons a lis pendens is recorded?

In my experience, divorce or separation situations take the top slot.  Mikey and Susie are married and they hate each other. Susie says, “Oh fine, you can have the house, just get out of my life”, so Mikey puts the home up for sale. Susie comes to her senses and realizes her soon to be ex is going to pocket some cash from the sale. So Susie’s divorce lawyer slaps a lis pendens on the the property until he figures out how to get Susie’s (and his) slice of the pie. Typically they will duke it out, resolve their differences, and the home will be sold.

Inheritance disputes often result in litigation. Let’s face it, when people die and will real property to an heir, others often come out of the woodwork and make a claim to the property.

Sometimes lenders will file a lis pendens on a property when they think foreclosure will be necessary. This stalls any attempt to sell the property to evade foreclosure.

There are a litany or reasons a lis pendens may be recorded. A title company will research the situation and should be able to advise you and your agent of what will be involved to clear the cloud on the title. Attorneys may or may not have to be consulted.

Can you buy a property that has had a lis pendens recorded? Yes. Just be careful and make sure you understand all of the potential ramifications.

Photo Credit: Creative Commons photo by umjanedoan

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