SS250: What is Lis Pendens in Real Estate?

SS250: What is Lis Pendens in Real Estate?

A Lis Pendens is a public notice filed in a county’s public records regarding ownership of a specific piece of real estate. In this episode, Charles explains what a Lis Pendens is and its implications for investors and potential buyers.

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Talking Points:

  • Lis Pendens is a Latin term that means “suit pending.” Within real estate, it refers to a formal, public notice filed in the county/city land records, indicating that a property is subject to a lawsuit. A Lis Pendens alerts buyers, insurers, lenders, attorneys, or title companies that there is current litigation and a legal claim that may affect the ownership or title of the property.
  • A Lis Pendens is not a lien, but it is similar because it makes a property less marketable, making it harder to sell the property and potentially preventing a sale until the issue has been resolved.
  • Why is a Lis Pendens Important?
    • The purpose of the Lis Pendens is to protect the interests and rights of the party who has filed the lawsuit. It protects this party because it prevents the property from being sold or further encumbered. It acts as a warning to prospective parties that the property is in dispute and litigation is pending.
    • It is a public notice that is normally recorded in the property’s local land records office. Once it is recorded, it becomes part of the property’s public record.
    • The Lis Pendens “clouds the title,” signally that there is an unresolved issue regarding the property.
    • A Lis Pendens makes it difficult, if not impossible, to sell, refinance, or transfer the property. The majority of buyers and lenders will not engage with a Lis Pendens property until the litigation has been resolved and the notice has been removed.
  • Typical Lis Pendens Scenarios:
    • Foreclosures: When a lender starts the foreclosure process against a property owner.
    • Divorces: Spouses disputing the ownership of the property.
    • Contract Issues and Disputes: When there is a contract dispute concerning the property, like the real estate purchase agreement.
    • Boundary, Easements, or Title Disputes: a party is disputing property lines, the rightful owner, or access to the property. 
    • Quiet Title Lawsuits: a legal action to clear a clouded title and determine clear ownership of the property.
  • A Lis Pendens will remain on the property’s record until the lawsuit has been resolved or dismissed, and this is done by court order.
  • For most buyers, a Lis Pendens on a property will be a red flag that makes the subject much less desirable. For some experienced real estate investors, however, it could be an opportunity, as when a Lis Pendens is filed, it commonly indicates that a property owner is experiencing a problem, which dramatically reduces the pool of potential buyers. A knowledgeable investor with experience dealing with Lis Pendens and motivated sellers might be able to craft a profitable win-win solution for all parties. I highly recommend that any buyer seek legal advice from a real estate attorney if they encounter a Lis Pendens on a property.

Transcript:

Charles:
Have you ever encountered a property with a list penance? What does it signify and how does it affect the property’s title? Welcome to Strategy Saturday, I’m Charles Carillo, and today we’re breaking down exactly what a list penance is in real estate, why it matters, how it works, and what it means for buyers and investors like you. So let’s get started. So a list pendants is a Latin term that means suit pending. So within real estate, it refers to a formal public notice filed in the county city land records indicating that a property is subject to its lawsuit and a list penance alerts, buyers, insurers, lenders attorneys, or title companies, that there’s current litigation and a legal claim that may affect the ownership or title of the property. A list penance is not a lien, but it’s similar because it makes a property less marketable, making it harder to sell the property and potentially preventing a sale until the issue has been resolved.

Charles:
So why is a LI penance important? Well, the purpose of a list penance is to protect the interest and rights of the party who has filed a lawsuit. It protects his party because it prevents the property from being sold or further encumbered, and it acts as a warning to prospective parties that the property is in dispute and litigation is pending. Now, it is a public notice that is normally recorded in the property’s local land records office, and once it’s recorded, it becomes part of the properties public record. The list pendants, clouds the title, and that signals that there’s an unresolved issue regarding the property and the list. Penance makes it more difficult, if not impossible to sell, refinance, or transfer the property. And the majority of buyers and lenders will not engage with the list Penant property until the litigation has been resolved and the notice has been removed.

Charles:
So what are some typical list pending situations? So number one is foreclosures. So when a lender starts the foreclosure process against a property owner, divorces, spouses disputing the ownership of a property contract issues and disputes. So when there’s a contract dispute concerning the property, like the real estate purchase agreement, boundary easements or title disputes. So a party is disputing the property lines the rightful owner or maybe access to the property, and then quick title lawsuit. So a legal action to clear a clouded title and determine the clear ownership of the property. So a list penance will remain on the property’s record until the lawsuit has been resolved or dismissed. And this is all done by court order. So for most buyers, a li penance on a property will be a red flag that makes a subject property much less desirable for some experienced real estate investors.

Charles:
However, it could be an opportunity as when a Li penance is filed as commonly indicates a property owner’s experiencing a problem, which dramatically reduces the pool of potential buyers. A knowledgeable investor with experience dealing with Lis pendants and motivate sellers might be able to craft a profitable win-win solution for all parties. Now, I highly recommend that any buyer seek legal advice from a real estate attorney if they encounter list penant on the property. So I hope you enjoyed.

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