Whether you’re a buyer, seller, or investor, no real estate transaction is without its challenges. Zoning laws, lease agreements, contracts, and more can make or break a negotiation. Not to mention the tension of getting lenders, title companies, buyers, and sellers together at closing with all the right documents and signatures. But sometimes, purchasing real estate gets even more complicated, like when a property’s title is muddled. Before you leap into buying or selling, it’s important to know more about titles, ownership, and something called lis pendens.
What is lis pendens?Lis pendens, Latin for “lawsuit pending,” is a public notice stating that the title or ownership of a piece of real estate is under dispute. Most homebuyers are familiar with its cousin, the lien. But a lis pendens is different. While a lien can be put against the title for unpaid taxes, child support, or even home contractor fees, a lis pendens is a potential lien. It means the right to ownership of the property might be uncertain, but the decision hasn’t been made yet. As a buyer, a lis pendens is always a warning light to proceed with caution. If you purchase a property with a pending lawsuit, you will be responsible for complying with the outcome. You could owe significant money to a lien holder down the road for a mistake you didn’t even make. It’s often best to wait on purchasing a property until the title is free and clear.
Where to find lis pendens on a propertyYou or your real estate agent can find a lis pendens on file with the Circuit Court in the county where the property is located. Recording a lis pendens with the Clerk of the court is required for it to be valid. It will include information such as:
- the names of all the parties to the suit
- a description of the real estate to be affected
- the nature of the lien, right, or interest sought to be enforced against the real estate
3 Common Reasons to File a Lis Pendens
- Once a borrower is three months delinquent on a mortgage, the bank usually begins foreclosure proceedings. Often the process includes filing a lis pendens, publicly declaring the title is under debate. During the foreclosure procedure, the lender and borrower will attempt to come to an agreement about the money due and ultimately, who owns the property. Until it’s settled, the title to the house is unclear, and potential buyers should probably steer clear. Once the bank regains ownership, the lis pendens is removed, and the home can be safely purchased.
- Overdue HOA Fees Homeowner and condo associations govern neighborhoods to ensure they stay well-kept and retain value. Fees can range from a hundred dollars a year to over five hundred dollars a month, depending on a neighborhood’s style and location. With sometimes pricey monthly charges, it’s easy to see how a delinquent homeowner might wrack up some serious debt. Some slippery homeowners may even try to sell their property to escape paying overdue accounts. To prevent this, the HOA can file a lis pendens to alert potential buyers.
- Divorce Although not as common as foreclosures, sometimes a lis pendens is filed during divorce proceedings. Usually, these cases happen when only one spouse’s name is on the title, and the home makes up a significant portion of the couple’s estate. To protect his/her stake in the property, the other spouse can file a lis pendens, waving a red flag to possible buyers to stay away until the divorce proceedings are over.