What is a Lis Pendens.
A Lis Pendens, if filed can at least temporarily, prevent a party from selling or transferring the property or stop foreclosure proceedings or. If a Lis Pendens is filed at the Los Angeles County Recorders office, it notifies all possible purchasers, anyone contemplating filing liens or encumbrances, or any and all other persons or entities that a lawsuit was filed where title is at issue.
Would a Lis Pendens stop a Sale of a Property or a Foreclosure?
In essence, the foreclosure or sales would be subject to the verdict handed down by the Court. In the case of a foreclosure, the real estate could still be foreclosed upon or ownership transferred, but the rights of the lender or new owner could be affected by the Court’s decision. A Lis Pendens is a Latin term for “pending suit.” Lis Pendens are filed with the court and then the conformed copy is filed at the county recorder’s office that covers the property’s location. In California, a Lis Pendens refers to the specific Code of Civil Procedure. When a Lis Pendens is filed, warns prospective buyers and lien holders that the real estate is involved in a legal action that could affect the status of the property. This could make a foreclosure null and void, depending on the outcome of the court case. In the case of a foreclosure, a Lis Pendens serves as a legal warning that a lawsuit has been filed and more importantly, it discourages a lender from completing the foreclosure because if its lien is ruled invalid or a qualified purchaser at the foreclosure auction have a sale reversed, the number of prospective buyers and the amount that may be offered may drop drastically. In essence yielding far less than the actual value of the note. In other cases, if the lender ends up with title to the property, the legality of the foreclosure and lender ownership may be in question.
Can a Lender Still Foreclosure with an active Lis Pendens?
Lenders can still foreclose and buyers can still purchase the property with the existence of an active Lis Pendens. However, both lenders and the buyers at an auction seldom buy a home with a Lis Pendens because the risk of having the transaction reversed by a Court could cost the lender or buyer a significant amount of money. The Lender and buyer would take title to the property subject to the decision of the court which may include rights that supersede those of the buyer or the bank.
Do you need to wait to Recording a Lis Pendens?
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If you have a claim to real estate, you must file a Lis Pendens immediately. There are many examples, one of which a buyer can file against a seller who refuses to sell and close escrow on the property. If the Buyer wants the Seller to perform and not allow the Seller to sell the property to a 3rd party, a Lis Pendens is filed to prevent the Seller from selling the Property right out from underneath the Buyer.
What if your sales contract requires you to Arbitrate?
If your agreement requires you to arbitrate to avoid litigation, you may still record a Lis Pendens. If a lawsuit is filed, the person filing the Lis Pendens must specifically apply to the court that the litigation will be “stayed” pending the outcome of arbitration.
Can a Lis Pendens be removed?
A Lis Pendens is recorded on the title or deed to the real estate. It remains a cloud on the title until it is withdrawn or expunged (a fancy word for removed). Before the case goes to trial, a Defendant may file a motion to expunge the Lis Pendens and request the court that if the Plaintiff wishes to keep the Lis Pendens recorded on the property, that Plaintiff post a bond. The purpose of the bond is to compensate the Defendant in case it suffers any damages in case the Plaintiff loses. Additionally, the Defendant must demonstrate that there is a valid factual basis to remove the Lis Pendens. This area of law is fact specific and may require the assistance of a seasoned Real Estate Attorney.