The Impact of Lis Pendens on Property Titles

Lis pendens, a Latin term meaning “suit pending,” is a legal notice filed with the county recorder to inform potential buyers or creditors that a lawsuit involving the property is pending. This notice serves as a public warning that the property’s title may be affected by the outcome of the legal dispute.

How Does Lis Pendens Affect Property Titles?

Cloud on Title: A lis pendens creates a “cloud” on the title of the property. This means that there is a potential legal issue or claim that could affect the property’s ownership or use.
Transfer Restrictions: While a lis pendens is in place, it can restrict the ability to transfer ownership of the property. Potential buyers may be hesitant to purchase a property with a lis pendens, as the outcome of the lawsuit could affect their rights.
Financing Difficulties: Lenders may be reluctant to provide financing for a property with a lis pendens. The uncertainty surrounding the property’s title can increase the lender’s risk.
Potential Loss of Value: In some cases, a lis pendens can reduce the property’s value. Potential buyers may be willing to pay less for a property with a cloud on its title.

When is a Lis Pendens Filed?

Lis pendens are typically filed when a lawsuit is initiated that involves a specific piece of real property. Some common types of lawsuits that may result in the filing of a lis pendens include:

Foreclosure Actions

Purpose: When a lender initiates legal proceedings to recover the principal and interest on a loan that the borrower has defaulted on.
How it impacts the property: The lender seeks to foreclose on the property, meaning they can sell it to satisfy the debt. A lis pendens is filed to prevent the property from being sold or transferred during the foreclosure process.

Partition Suits

Purpose: When co-owners of a property cannot agree on how to divide the property or its proceeds.
How it impacts the property: The court may order the property to be sold and the proceeds divided among the co-owners. A lis pendens is filed to prevent the property from being sold or transferred during the partition process.

Quiet Title Actions

Purpose: To establish clear ownership rights to a property. This may be necessary when there are conflicting claims to ownership or when the chain of title is unclear.
How it impacts the property: A lis pendens is filed to prevent the property from being sold or transferred while the court determines the rightful owner.

Eminent Domain Proceedings

Purpose: When the government seeks to acquire private property for public use, such as building a road, school, or park.
How it impacts the property: The government files a lis pendens to prevent the property from being sold or transferred while the eminent domain proceedings are pending.

Boundary Disputes

Purpose: When there is a disagreement between neighboring property owners about the location of their property lines.
How it impacts the property: A lis pendens is filed to prevent the property from being sold or transferred while the boundary dispute is being resolved.

Construction Lien Claims

Purpose: When a contractor or subcontractor is not paid for their work on a construction project.
How it impacts the property: The contractor or subcontractor may file a lien against the property to secure payment. A lis pendens is filed to prevent the property from being sold or transferred until the lien is resolved.

Removing a Lis Pendens

Once the lawsuit is resolved, the lis pendens can typically be removed. However, the process for removal may vary depending on the jurisdiction.

It’s important to note that a lis pendens does not automatically mean that the lawsuit will be successful. The outcome of the lawsuit will determine whether the property’s title is affected.

The impact of lis pendens on property titles can be significant, as it creates a cloud on the title and can restrict the ability to transfer ownership or obtain financing. Understanding the various types of lawsuits that can result in a lis pendens is crucial for property owners, buyers, and lenders.

The Takeaway

Orchestrate is here to help you navigate the complexities of lis pendens. Our team of experts can provide valuable assistance in:

Title Searches: Identifying any existing lis pendens or other title defects.
Lis Pendens Removal: Guiding you through the process of removing a lis pendens once the underlying lawsuit is resolved.

With Orchestrate as your partner, you can have peace of mind knowing that your property title is secure and protected.