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Sunday, December 2, 2012

Lis Pendens

A "Lis Pendens" (Latin for, and sometimes called, a "pendency in action"), is a powerful legal tool that may be recorded when there is a pending legal proceeding involving real estate ownership, or potential claims over that ownership. For example, in a divorce, if there is already a dispute over who owns a property, usually the lawyer for either the husband or the wife; may record a Lis Pendens at the county recorder, which notifies any potential buyer that the ownership of the property is in dispute.

This article is my opinion, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.

A Lis Pendens is a conveyance within the meaning of the recording statutes. A conveyance gives constructive public notice. Except possibly in Florida, very few title companies, lenders, or buyers, will proceed until the Lis Pendens is removed.

Slightly related to a Lis Pendens, is an action in partition, which can occur when there are multiple property owners, and all or even one wants to sell the property. When an action in partition is approved by the court, the property will be sold. There is no defense to an action in partition, because if the parties do not settle, the court appoints a trustee to sell the property. The trustee takes a big cut of the profit, then makes distributions to the former property owners. There are no restraints on alienation, because it does not interfere with anyone's right to sell the property. After the sale, everyone loses their stepped-up basis, and may have to pay capital gains taxes.

A Lis Pendence does not attach to people, it records a "Notice of Pendency of Action" against a particular piece of real property that is the subject of some impending legal proceeding. The recording gives constructive notice to the world that the piece of real property is the subject of a legal matter that may affect a buyer's, lender's, or another grantee's rights in that piece of real property, after the recording date of the notice. Whatever happens to that real property after the date of recordation of the notice, will be subject to the outcome of the related legal action.

Usually, attorneys can record a notice of pendency of action without a court hearing and order. Individuals who are not licensed attorneys may not record a "Notice of Pendency of Action" unless they first have permission from the court to do so. A hearing must be held, and the judge must agree that the pro-per litigant has probable cause to prevail on the merits in the matter to be litigated. If the judge agrees, they will sign an order granting leave of the court to record the notice of pendency of action.

In my opinion, a judgment enforcer who owns a judgment and records a lien, usually does not have standing to record a Lis Pendens, because they do not have a "real property claim" as defined by the statutes because their lien interest usually would not result in acquiring title interest in the real property. Therefore, in lien situations, a Lis Pendens is probably not the appropriate course of action.

If you are the judgment creditor, and your judgment debtor might be selling their property or planning to, instead of a Lis Pendens; perhaps ask the court for a temporary restraining order, followed by a hearing on a preliminary injunction. Note that the owner of the real property might be able to apply to the court, for an order for the creditor or judgment enforcer to furnish an undertaking (post a bond), to protect the property owner's interest in the real property.


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