What is a Lis Pendens
A lis pendens is an official notice to the public that a lawsuit involving a claim on a property has been filed. Lis pendens refers to the concept that a buyer of a property must assume any litigation that exists pertaining to the property. If a bank is suing the owner of a lot and a buyer purchases the lot, then the new owner must face the lawsuit; sale of the property does not prevent the plaintiff from seeking redress via litigation. It can represent a contingent liability.
BREAKING DOWN Lis Pendens
Lis pendens is literally translated from Latin as "a suit pending." This condition can adversely affect the sale price or possibility of a sale. The term is commonly abbreviated "lis pend."
Lis pendens provides constructive notice, or a warning, to prospective homebuyers that the ownership of a property is in dispute and there is litigation pending. Lis pendens can only be filed if a claim is related specifically to the property. By filing a lis pendens, an individual or entity is protecting its claim to the title pending the outcome of the lawsuit. A lis pendens is only lifted once the lawsuit has been settled. Because pending litigation can take months and sometimes years, buyers are often advised to stay clear of these properties.
When a Lis Pendens Is Used
Lis pendens is often filed in divorce cases where the distribution of real estate properties has not been settled. It is particularly common in cases where a property is listed in the name of one spouse, and the other spouse seeks a portion of the asset. The spouse whose name is on the title would have a difficult time selling the property under pending litigation.
Lis pendens is almost always used by lenders who have filed a notice of default on a delinquent borrower. Banks use the procedure to put the public on notice that a property is in foreclosure. Other types of creditors whose debt is secured by a property can also foreclose on a property. This often occurs when a homeowners' association initiates a foreclosure for delinquent fees.
It is not uncommon for lis pendens to arise in cases of contract disputes, where a buyer feels he has been wrongly excluded from the purchase of a home. For example, if buyer A and a seller enter into a contract for the sale of a home and the seller decides to sell the home to buyer B, buyer A may sue the seller to enforce the sale. The buyer can file a lis pendens, making it difficult for the seller to actually sell the house. If buyer B proceeds with the purchase and the courts determine that buyer A is entitled to enforce the sale, buyer B loses the property to buyer A and must go to the seller to get his money back.