What's This LP About? All About the Lis Pendens
Many people have asked, so what’s this lis pendens about? This article will answer the question. And if you’ve never heard the words lis pendens before, well, read this article and you will know exactly what it is if and when you do hear it. And if you’re in real estate, then you will hear it or you should hear it.
All About the Lis Pendens
---by SolonPhillips, Esq.
Many people have asked, “So what’s this lis pendens about?” This article will answer the question. And if you’ve never heard the words “lis pendens”before, well, read this article and you will know exactly what it is if and when you do hear it. And if you’re in real estate, then you will hear it or you should hear it. If you have anything to do with real estate then knowing what a lis pendens is and what it is not will benefit you. Period. So here it goes.
This is a Latin word that literally means, “a suit pending.” This is the very first thing you need to know about a lis pendens—it means that there is “a suit pending.” A lis pendens is written notice that there is a suit pending.
But what does that mean and why should you care? Well, every time you go to buy or sell a house or a building, there is a title or a deed associated with the house or building. The title or deed is a document showing who is the current owner of the house. Whomever you are buying the house from must have a title or deed to the house or else they cannot sell you the house.
So how do you know who or what is on the deed or title of the house? You know this by pulling the title report. The title report to a house or building is something very much like a medical record or better yet, a CarFax report.
Most people are familiar with the commercial for CarFax. Someone says, “show me the CarFax!” meaning show me the written history of the car so I can see all the accidents, odometer readings,salvage/junk title—show me everything that ever went on with the car and is going on with this car. Show me the CarFax report. The title to a house is similar to a CarFax in that it shows the potential buyer what went on with the ownership of the house and what is going on with the ownership.
In comes the lis pendens.
The lis pendens is a written notice that goes on the title of a hous eor real property to tell the world, “there is a pending suit” on this house you are about to buy or sell. Why is that important?--because once the lis pendens is placed on the title, the buyer is put on notice that if he or she buys this house, he risks the chance of losing the house after the purchase because the house is “pending a lawsuit.” This means that even though you may have bought the house and think that you own the house, if the person who has filed suit to gain this house wins, you will lose the house—and all the money you put into the house. Ouch!
It works something like this. Say you are looking for a house. You’re looking, looking, looking and then boom! You find what seems to be the perfect house. Right there on Zillow, you find it. You call your realtor. Your realtor gives you the rundown and then promptly sets up a time for you to view the house.
You and your spouse go to the house and it is everything you have ever wanted. The home has four bedrooms with a master-bedroom on the first floor--this was a must because your knees are bad and you can’t deal with too many stairs. It has a full basement with 9 feet ceilings—this is important because your spouse is a sports fanatic and has huge parties and the basement is the perfect place to host loud, rambunctious get-togethers. The kitchen, oh my! The kitchen is the largest, most spacious kitchen you’ve ever seen, equipped with an island,double oven, and tile floors made of something that looks like grey marble.
You absolutely love this house. You love it! And even more than that, the house is in your price range--$500,000. It’s a steal! This house appraises for$550,000, which means it already has $50,000 equity in it. If your offer is accepted you are ahead of the game.
So you instruct your realtor to put in an offer. You go back and forth with your realtor, who is going back and forth with the Seller’s realtor: how much closing help will they give? No, that’s not enough. Can we have a 5-day inspection period? Will they give credit for repairs? Can we close sooner? yada, yada, yada—finally, after what seems like weeks of back and forth, your realtor tells you that your offer for $500,000 is accepted. Woooohoooo!!! You are winning!
You were pre-approved for $505,000 before you even found the house so you already know that your financing is in place. You are ready to close, and you could not be more excited.
As closing day approaches, your realtor contacts you and tells you—a day before closing—that the title report came back and there is a“cloud” on the title. You say, “A what?”
Your realtor says again, “a cloud—there is a cloud on the title.”
You say, “What does that mean? A cloud? Is it going to rain on my house?”
“No, no. A cloud. There is a lis pendens on the title.”
Ah! A lis pendens. Right.
How Did It Get There?
So your beloved house has a lis pendens on it. How did the lis pendens come to cloud the title to your house? This is how.
The guy who is selling you your house used to live in the house with his soon to bee-wife. The couple had a few too many rough spots and the wife decided to leave the husband. She moved out of the house and out of the state. While she was out of the state, the husband filed for divorce and decided to sell the house. He reasoned that it was his house to sell. The problem is, the house was not his to sell.
Typically, property purchased and owned during the marriage is marital property and requires both the husband and wife to agree to sell the house or have a court force the sale of the house.
But the wife was away. She was not communicating with her husband. The husband did not want the house, but he could sure use the money, especially since there was no mortgage on the home. So he figured, with wife away, with her not communicating with him, why not? He’ll just sell the house and move on with his life and his$500,000. Perfect plan.
Not so perfect plan. When the wife realized the husband was planning on selling the house, her house, guess what she does? She filed a lis pendens—a simple one-page document that is filed in the land records department located in the county courthouse where the house is located. Her simple filing places world is on notice that her house is subject to a pending lawsuit and if you buy it, you buy at your own risk.
And with the lis pendens goes your hopes and dreams. Why? Because if you get a loan to buy this house(if your bank even lends you the money—most banks will not bother lending you the money with a lis pendens on the title) and you buy the house, move into the house, if the person who put the lis pendens wins the lawsuit, then the winner of the lawsuit can reclaim his/her house and have you evicted. Why? Because you purchased the house subject to a lis pendens. You purchased a house knowing good and well you might lose it. You took a $500,000 risk and lost.
This is the power of a lis pendens.
Solon Phillips, Esq., is a partner of Remus Enterprises Law Group based in the Nation’s Capitol. He is also an author and part-time legal instructor.