If you want to put later buyers on notice of a legal claim involving real property, you can record a lis pendens (also known as a notice of pendency of action) with the recorder in each county where the property is located. CCP §§405-405.61. Recording a lis pendens, however, isn’t without its own set of risks.
Here are a few pros and cons of recording a lis pendens to consider:
|1. Notice to Subsequent Purchasers: A recorded lis pendens places all potential purchasers on notice of the plaintiff’s claims, precluding them from asserting a future bona fide purchaser defense. CCP §405.24; CC §1107. See Kendall-Brief Co. v Superior Court (1976) 60 CA3d 462 (involving claims and counterclaims of easement, trespass, nuisance, quiet title, and violation of covenants).
2. Seniority: A judgment favorable to a party who recorded a lis pendens relates back to and receives priority from the date on which the notice was recorded. Thus, it’ll be senior to any interest in the property acquired after that date, subject to a few exceptions (e.g., a declaration of homestead). CCP §405.24; CC §1213.
3. Leverage: Although a lis pendens isn’t technically a lien on the property, it effectively renders the property unmarketable. As a result, the plaintiff may gain substantial leverage to force a quick and favorable resolution, particularly when the owner can’t afford prolonged litigation without selling the property.
|1. Risk of Expungement: If a lis pendens is expunged or withdrawn, only the named parties to the action are considered to have knowledge of the action or its underlying claims, regardless of whether the person has actual knowledge of the action. CCP §405.61. Additionally, neither the notice, nor any information derived from it, will constitute constructive notice. CCP §405.60. If the plaintiff doesn’t record a lis pendens, the subsequent purchaser has no similar means of negating any actual or constructive knowledge obtained. In this way, an expunged lis pendens may leave the plaintiff in a worse position than she would be in had no notice been recorded.
2. Liability for Owner’s Fees and Costs: The plaintiff risks liability for the owner’s attorney fees and costs on a motion to expunge. The court generally must award attorney fees and costs to the prevailing party on a motion to expunge, absent specified findings. CCP §405.38.
3. Liability for Undertaking: On motion, the court may require the plaintiff to file an undertaking as a condition of allowing the lis pendens to remain effective. CCP §405.34.
4. Increasing Prevailing Owner’s Damages: Courts may consider the effect of a lis pendens on the value of the property when assessing a prevailing owner’s damages in the underlying action. For example, a prevailing owner may obtain consequential damages caused by the lis pendens in preventing the owner from reselling the property to another. See, e.g., Askari v R & R Land Co. (1986) 179 CA3d 1101.
5. Civil Penalties if Filed to Harass: Filing a lis pendens with the intent to harass is punishable by civil penalty. CCP §765.010. Similarly, a lis pendens recorded after an automatic stay in bankruptcy violates the stay and may be sanctionable if it constitutes a willful violation. Barnett v Edwards (In re Edwards) (BAP 9th Cir 1997) 214 BR 613.
Although a lis pendens is a powerful provisional remedy, counsel should carefully consider its inherent strategic and economic risks when advising a client. To learn more about the lis pendens procedure, including procedural guidance and tactical considerations, check out CEB’s California Real Property Remedies and Damages, chap 13, and California Real Property Ownership & Taxation, chap 8.
Other CEBblog™ posts you may find useful:
- New Year, New Laws for Real Property Lawyers
- Get Attached! Using a Writ of Attachment in Construction Cases
- Backsies! When Can You Rescind a Real Property Purchase Agreement?
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