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Take this constructive notice as a warning sign if you're buying real estate.
Lis pendens signals a pending lawsuit
It’s usually the first step to foreclosure
You can check if there’s a lis pendens on a property since it’s public record
This public complaint might have lasting negative effects
A lis pendens is a notice of pendency of action. The Latin term term roughly translates to “suit pending.” In plainer terms, it means that there’s a pending lawsuit over land or real estate property, usually in an effort to reclaim ownership if there’s a dispute. In other cases, the notice of lis pendens signals the start of the foreclosure process when the owner is in default. However, that’s not the only time a lis pendens is used. We’ll discuss why it might be filed and its effects.
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If you misfile a lis pendens, you may be sued for slander of title and be subject to penalty fees. Before filing, make sure you have a suitable reason or claim to the property. Some of the common reasons to file a lis pendens are:
In short, anyone with an ownership interest in a property can file a lis pendens. This might include spouses dividing assets in a divorce settlement, or heirs battling over the deceased's estate (maybe by contesting a will). If you file a lis pendens on a property after it has gone through probate, your chances of winning the lawsuit might go down, since it’s been transferred to the rightful heir.
Defrauded buyers, who feel they should have been the rightful purchasers of a home can also file for lis pendens if you plan to sue. For example, if you put down “earnest money” for a house and then the seller reneges on the deal. Consult with a real estate attorney before filing the complaint. If you’re dealing with less than honest sellers, it might not be worth the trouble.
A lis pendens can be filed to get the title changed on a property. To protect potential legal fees the process might incur, both lenders and homeowners might opt for title insurance.
If you’ve been delinquent on your mortgage payments or property taxes, your lender or local government may file a lis pendens against you.
A lis pendens might also be issued for a mechanic’s lien, which is filed by subcontractors who haven’t gotten paid for their work. A mechanic’s lien is used when a debt has not been paid and a claim can be taken against the property that was serviced.
Additionally, a lis pendens can be filed because of unsafe conditions and property damages. For example, the city might file a lis pendens against a building you own if it does not adhere to proper code and is deemed unsafe.
If you can’t make mortgage payments on your house, then your lender can seize your home. This is known as foreclosure. Depending on the states foreclosure process, the lender will file either a notice of default or a lis pendens.
Once the lis pendens is filed, it will become part of the public record because it is a constructive notice. This also means that if you didn’t receive notification directly (perhaps you were sent a letter that got lost in the mail), the lis pendens still remains in effect.
How long it takes for your home to foreclose once you receive notice of lis pendens will depend on the state. In California, it might take a minimum of 120 days, and 180 days in Florida, while in New York it can take as long as 15 months after the notice is filed.
[Real estate investors or savvy house-hunters tend to seek out distressed properties with notice of pendency with the hopes of making a cheap and quick purchase before the home hits the foreclosure market.
Lis pendens can adversely affect the buying and selling of the property in question; since the ownership of the property is ultimately at issue and under consideration, any parties involved in the potential transaction will be on guard.
The lender might pass on approving a mortgage if they suspect the deal will fall through or be complicated than it's worth. The same thing might happen with homeowners insurance companies. Because lis pendens have lasting often times negative effects on a property, they’re often used maliciously to dissuade buyers or prevent a sale. We’ll discuss that next.
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The lis pendens can be removed once the lawsuit is settled and the court has ruled on an outcome. It might also be resolved on its own if an agreement is reached between the title owner and whoever filed the complaint. If the claim was wrongfully filed, the lis pendens will be expunged. As previously mentioned, the filer may have to pay penalties and could be sued for slander of title. If the lis pendens was filed by the city for unsafe conditions in a building you own, you may have to file a cancellation request with the county clerk’s office.
Other times, there may have been a lis pendens filed that was never further pursued in court with any legal action. The complaint may expire after a certain period of time depending on the state. (For example, in Florida the lis pendens will expire one year if no action has been taken.) If the state does not set an expiration, you may need assistance from an attorney to have it officially removed from record.
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Policygenius’ editorial content is not written by a certified financial planner or advisor. It’s intended for informational purposes only and should not be considered legal, financial, or investment advice. Consult a professional to learn what financial products are right for you.
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