California law, courts, and history have consistently promoted that real property be freely and completely transferable. However, it is not uncommon for disputes to arise where one party alleges that an owner cannot transfer real property because the alleging party is entitled to the property sought to be transferred. One of the strongest weapons a party has when filing an action against a landowner alleging real property claims is the lis pendens.
A “notice of pendency of action” or “lis pendens” is a notice recorded in the chain of title of a pending lawsuit that affects that particular real estate. A lis pendens may apply to any claim affecting the title to real property, the right to use and occupy the property, or an alleged interest in the property. A classic example of a lawsuit that involves real property is one that seeks to prevent a sale. The underlying claim could also involve litigation not seeking to change the ownership if it involves the determination of particular rights associated with ownership.
Once a lawsuit alleging a real property claim is filed, a party can file a lis pendens with the county recorder where the affected real property is located. Once properly recorded, the lis pendens puts subsequent purchasers, transferees, and encumbrancers on constructive notice of an action effecting the property.
The consequence of the filing and recordation of a lis pendens clouds title and prevents the sale of the property until the litigation is resolved or the lis pendens is expunged. This is because the filing of the lis pendens binds any subsequent owner to the outcome of the litigation. In other words, once the lis pendens is recorded, any person who takes an interest the property is bound by the rulings in the underlying action. Notwithstanding the merits of the underlying claim, the filing of the lis pendens itself serves to cloud title. This risk is why the filing of a lis pendens most always serves to renew contingency periods in real estate sales contracts. The mere act of filing a lis pendens conflicts with the policy of free transferability of real property and is an open invitation for misuse and abuse.
One safeguard from abuse is that only licensed California attorneys may record a lis pendens at the onset of litigation. Self-represented individuals may file a real property lawsuit, but may only record a lis pendens with the permission of the court after a formally noticed motion. Another safeguard from abuse is that a lis pendens may be ordered removed from record title and expunged where the party who recorded the lis pendens cannot establish the “probable validity” of the real property claim by a preponderance of the evidence. Unlike most other motions in civil actions, the burden is on the party who filed the lis pendens prove up the existence of their real property claim by a preponderance of the evidence—namely that it is more likely than not the party who asserted the real property claim will obtain a judgment on the claim in his or her favor. Once a motion to expunge is filed, the court conducts a “mini-trial” on the merits of the real property claim. The plaintiff must establish their prima facie case and the court must then consider the relative merits of the parties’ respective positions and make a determination of the probable outcome of the litigation. Moreover, if the court rules in favor of expunging the lis pendens due to the plaintiff’s failure to prove probable validity of their claims, attorney’s fees and costs will be ordered to be paid to prevailing party. An improper lis pendens could also support a claim for slander of title if filed without a pending action involving a real property claim. If the lis pendens is not privileged, the property owner could pursue an action for damages caused by the slander of the property’s title and for interference with prospective economic advantage. The recordation of a lis pendens has chilling effect on the transferability of real property. It is a powerful legal tool with tremendous consequences.
If you are curious or concerned about the lis pendens and a property you own, or are looking to learn more about a property dispute, you should Contact the attorneys of Zacks, Freedman, & Patterson for guidance.