Lis Pendens: Definition, Legal Implications, and Its Impact
Lis pendens is a Latin term meaning "pending lawsuit." In real estate, it refers to a formal notice filed in public records indicating that a property is involved in an ongoing legal dispute. This notice serves as a warning to potential buyers, lenders, and other interested parties that the property’s ownership or title may be subject to litigation.
A lis pendens notice does not prevent a sale, but it does create a cloud on the title, making it difficult for the owner to sell or refinance the property until the legal dispute is resolved.
How Lis Pendens Works
A lis pendens is typically filed by a plaintiff in a lawsuit involving real estate, such as a dispute over ownership rights, foreclosure, unpaid debts, or contract breaches. Once recorded in public property records, the notice:
Alerts potential buyers and lenders that the property is involved in litigation.
Serves as a legal claim against the property, which could impact ownership transfer.
Protects the plaintiff's interest by preventing the owner from selling the property without disclosure of the dispute.
A property owner who wishes to sell or refinance will likely need to resolve the legal matter or remove the lis pendens before proceeding with the transaction.
Common Reasons for Filing a Lis Pendens
A lis pendens is filed in various legal disputes related to real estate, including:
Ownership Disputes – When multiple parties claim ownership rights to the same property.
Foreclosure Proceedings – A lender may file a lis pendens when initiating foreclosure to notify others of the pending action.
Breach of Contract – If a buyer or seller fails to uphold a real estate contract, the wronged party may file a lis pendens.
Mechanic’s Liens – Contractors or suppliers who have not been paid for work on a property may file a lawsuit and attach a lis pendens.
Divorce & Property Division – In cases where spouses dispute property division, a lis pendens may be filed to prevent unauthorized transfers.
Impact of Lis Pendens on Real Estate Transactions
For Property Owners
A lis pendens makes it difficult to sell or refinance because it warns buyers and lenders that the property has unresolved legal issues. Most buyers will avoid purchasing a property with a lis pendens, fearing potential legal complications.
For Buyers
A lis pendens poses a risk to new buyers, as purchasing a property with pending litigation could lead to ownership disputes or financial losses. Title insurance companies may refuse to insure properties with a lis pendens, further complicating transactions.
For Lenders
Mortgage lenders hesitate to finance properties with a lis pendens due to the risk of losing their investment if the lawsuit affects ownership rights. Borrowers may need to settle or remove the lis pendens before securing financing.
How to Remove a Lis Pendens
If a lis pendens is wrongfully filed or the dispute is resolved, property owners can take legal steps to remove it, including:
Settlement of the Lawsuit – If the dispute is resolved between the parties, the plaintiff can voluntarily remove the lis pendens.
Motion to Dismiss – If a lis pendens is fraudulent or lacks legal grounds, the property owner can request a court to dismiss it.
Posting a Bond – Some courts allow property owners to post a financial bond to remove the lis pendens while the lawsuit continues.
Final Thoughts
A lis pendens is a powerful legal tool that protects plaintiffs in real estate disputes but also creates significant barriers for property owners trying to sell or refinance. Whether you’re a buyer, seller, or investor, understanding lis pendens and its implications is crucial for navigating real estate transactions and legal disputes effectively.
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