What You Need to Know About Lis Pendens in Real Estate

Lis pendens, a frequently misunderstood doctrine, is a crucial aspect of real estate that deals with unconventional interests. The term itself means “pending suit,” and lis pendens notices serve as a means for parties with unrecorded or unperfected claims to inform interested third parties about their rights or interests in a property.

1. The Significance of Lis Pendens Notice

In numerous states, lis pendens notices are governed by statutory regulations. This means that parties must adhere to the specific requirements outlined in the notice to ensure its validity. Even in jurisdictions where lis pendens functions as a common law doctrine, disputes often arise regarding the sufficiency of the notice and its technical effectiveness.

2. The Power of Lis Pendens Notices

Lis pendens notices have the potential to be a powerful tool. These notices are typically recorded in the real property records, effectively alerting others that a dispute over the property is ongoing. Consequently, anyone who acquires or expresses an interest in the property after the lis pendens is recorded becomes subject to its terms. This empowers a party with uncertain rights or interests in real estate. For instance, if there’s a disagreement regarding the enforceability of a letter of intent to purchase real estate, the prospective buyer can strengthen their claim by utilizing a lis pendens notice, provided they are confident in the binding nature of their yet-to-be-realized right to acquire the property. Similarly, when uncertainties surround the enforceability of a real estate development contract, a prospective developer can protect their interests by filing a lis pendens notice, thereby inhibiting any alternative use of the property.

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3. Risks Associated with Improper Use of Lis Pendens Notices

Improperly recording lis pendens notices, whether due to the wrong context, premature filing, or inappropriate intentions, can expose the party asserting the interest to significant liabilities. Excessive use of a lis pendens notice may amount to slander of title, carrying the potential for consequential and derivative liabilities, as well as potential liability for the slandered party’s attorneys’ fees.

4. The Importance of Understanding Local Practice and Law

It’s crucial to note that lis pendens laws and practices vary greatly between jurisdictions, sometimes even dramatically. A recent federal case highlights the risks of employing lis pendens in an unfamiliar jurisdiction. In this instance, a New York-licensed attorney appeared pro hac vice in a Wisconsin federal court and submitted a lis pendens notice pertaining to their clients’ claim. However, the claim in question was unrelated to the real estate involved and contained technical defects under Wisconsin law. As a result, the claimant’s strategy backfired, leading the federal district court to set aside the notice and impose sanctions on both the attorney and their client. The attorney, in addition to losing their pro hac vice status, was unable to continue representing their client in the primary dispute between the parties.

It’s worth noting that lis pendens is a valuable resource when used appropriately and is increasingly being utilized in new contexts. At Garrity Traina, our construction and real estate professionals possess extensive experience and regularly handle lis pendens-related issues and disputes in various jurisdictions.

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