How To Remove A Lis Pendens From Your Property
March 3, 2013 1 Comment
If you’ve ever been involved in litigation over a piece of real estate, you know about the dreaded lis pendens. A lis pendens is simply a notice recorded with the county recorder which states that the right of ownership or possession of a piece of real estate is the subject of an existing lawsuit. In other words, the recorded lis pendens is notice to the world that ownership (typically) of a piece of real estate is disputed and that there is a plaintiff in existing litigation who is making claims to the property adverse to the owner of title.
A lis pendens isn’t a lien or mortgage against the property but it can have the same effect. A lis pendens is a cloud on the property’s title. The lis pendens shows up in the chain of title and will show up on a preliminary title report. Practically speaking, the lis pendens ties up the property until it is removed, either upon resolution of the litigation or involuntarily by court order. The law regards a lis pendens as a legally binding notice on any subsequent purchaser of, or lender on, the property. Thus, a lis pendens prevents BFP status. (Please see my post on Bona Fide Purchaser). Therefore, if a person buys or lends against a property that has a lis pendens recorded against it, he does so subject to, and at the risk of, the existing dispute and litigation. So, should the litigation resolve in favor of the plaintiff, the buyer or lender who invested after the lis pendens recorded could find his rights to the property now in conflict with prevailing plaintiff.
You may ask, why would anyone buy or lend against a property with a lis pendens? The answer: they don’t. A lis pendens cripples real estate. If you have one recorded against your property, you want it off, fast. As long as the lis pendens is there, you can forget selling or refinancing your property. True, you may find a wheeler-dealer type who’ll buy your property, or a hard money lender who’d refinance, subject to the lis pendens, but they’ll demand a steep discount or high interest to assume that risk. Why take such a financial hit when you can just have the court order the lis pendens removed?
In the post-foreclosure context, the typical course is that prior owner files his lawsuit to set aside the foreclosure sale. He records his lis pendens on the same day that he filed the lawsuit. If the prior owner is represented by a lawyer, he can record a lis pendens as a matter of right; he doesn’t even have to ask the court for permission. Now what? It’s probably best that you hire a lawyer. The lawyer will file a motion to expunge the lis pendens. In the motion, the lawyer will ask the court for an order removing the lis pendens and for an award of attorney’s fees against the prior owner who recorded it for the cost of bringing the motion.
Although filing a lis pendens is easy for the prior owner, opposing a motion to expunge the lis pendens is much harder. In other words, it may be easy to record a lis pendens against property but it isn’t so easy to keep it there. Once the new owner files the motion to expunge, the law places the burden of proof on the former owner to justify keeping the lis pendens on the property. To keep the lis pendens, the law requires that the former owner show the “probable validity” of his lawsuit against the new owner. In plain language, the former owner will have to prove in his opposition to the motion that he would probably win the case at trial if it ever got there. In effect, the prior owner will have to put on a mini-trial, in writing, sufficient to show the court that his case has such merit that he would prevail at trial. That is a tough burden for the plaintiff early on in a lawsuit.
I always recommend to clients that they get a motion to expunge on file immediately. I usually prevail in these motions and get a nice award of attorney’s fees for my clients as well. There are many advantages to winning a motion to expunge. Prevailing on the motion, obviously, frees up the client’s property. He’s now free to sell it. If the client does sell the property during the pendency of the case, he creates another degree of separation (and another bona fide purchaser) between the plaintiff and the property thereby dealing another serious blow to the plaintiff’s hope of ever getting the property back.
Losing the motion also has a serious demoralizing effect on the plaintiff. Remember, the plaintiff’s burden when opposing the motion is to show the probable validity of his case. Thus, when the court rules against the plaintiff on the motion to expunge, the court is implicitly telling the plaintiff that the court doesn’t think that plaintiff will win the case at trial. This ruling is a tough piece of feedback for the plaintiff and a strong signal to how the court will rule if the case ever comes before him for trial. This ruling can be particularly demoralizing to the plaintiff if his theory of recovery is novel or requires an extension of existing law. In ruling against him on the motion, the court is essentially telling the plaintiff no dice and is impliedly rejecting plaintiff’s theory of the case. Another advantage is that the attorney fee award can act as a bargaining chip or, through immediate collection efforts, as a means to disrupt the plaintiff’s financial life. Losing a motion to expunge can also be a part of a series of losses that the plaintiff suffers early in the case which can further pressure him to abandon his litigation.