By Kelly Hartog
Is there anyone this side of a Supreme Court Justice who hasn't signed off on a document without reading or understanding every single word and Latin phrase? When it comes to buying a house, it pays to know the phrase "lis pendens".
A lis pendens is the Latin term for a Notice of Pendency of Action. It means that a lawsuit is pending against the title of a property. The lis pendens is a public notice letting buyers know there is a dispute over the ownership of the property. It is filed in the county clerk's office wherever the title of the actual property is listed.
Anyone willing to purchase property under a lis pendens is subject to the outcome of the lawsuit. This is why you should be worried if you discover a lis pendens on a title report, says David Reiss, a former private practice real estate attorney who is now the Academic Program Director at the Center for Urban Business Entrepreneurship (CUBE) at Brooklyn Law School.
"Depending on the underlying action that is the subject of the lis pendens, ownership of the property might be at issue. If one of the parties of the underlying litigation wins, they may own the property," Reiss explains. And if they own it, that means you don't.
For buyers, a lis pendens should throw up many red flags. Lenders are usually unwilling to finance a mortgage until the lis pendens has been removed from the title. In addition, while a property can still be sold while there is a lis pendens, title companies will not insure the property, and that alone should be a deterrent to purchasing.
A lis pendens can be placed on a property for a variety of reasons. It could be due to divorce proceedings, an inheritance issue over a property held in estate, taxes owed to the IRS, or the property could be about to go into foreclosure. There could even be criminal fines owed.
"A lis pendens can be time-consuming and aggravating at best," says Denise Supplee, a realtor and Co-Founder and Director of Operations at Spark Rental. "That being said, it is possible to move beyond these. Depending on state laws, there are steps that can be taken to have these attached lawsuits removed. However, there may be a cost of an attorney and definitely a loss of time."
Because a lis pendens can only be about the property itself and not about the parties who have an interest in the property, there are two ways the lis pendens can be expunged, says Reiss. The first is "if the lis pendens really has nothing to do with the property and should never have been there in the first place, you can fight it," because a lis pendens is a powerful tool that is often subject to abuse. The second is if the parties involved ultimately resolve the lawsuit.
The terms of a lis pendens and how to deal with them will vary from state to state, depending on where the property is located. You should contact the county clerk's office in the state where the property in question is listed, as well as speak with a real estate attorney.
To avoid the possibility of becoming caught up in a lis pendens, you should always do a title check through the local county clerk's office where the property is listed.
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