What is Lis Pendens?
Lis pendens is a Latin term meaning "suit pending." In real estate, it refers to a recorded notice in the county records that alerts the public to a pending lawsuit involving a specific property. The filing puts anyone considering purchasing or lending against the property on notice that there is active litigation that could affect ownership or the property's title. A lis pendens is not a lien -- it doesn't create a debt against the property -- but it functions as a warning flag that effectively prevents most transactions from closing.
When a lis pendens is recorded, title companies will almost always refuse to issue title insurance until the notice is removed. Without title insurance, the buyer takes on all the risk of the pending lawsuit, which could result in losing the property entirely. For practical purposes, a lis pendens freezes the property's marketability until the underlying litigation is resolved.
Common reasons for lis pendens filings
Foreclosure actions are the most common trigger. When a lender files a foreclosure lawsuit, they typically record a lis pendens simultaneously to prevent the borrower from selling the property and pocketing the proceeds during the litigation. Divorce proceedings frequently involve lis pendens filings when one spouse wants to prevent the other from selling marital property. Contract disputes between buyers and sellers -- particularly specific performance claims where a buyer is trying to force a sale -- also generate lis pendens filings.
Other situations include boundary disputes with neighbors, mechanic's lien foreclosure actions, partnership or LLC dissolution disputes involving real property, and quiet title actions to resolve competing ownership claims. Any lawsuit where the outcome could affect property ownership or the right to possess or use the property may warrant a lis pendens.
How lis pendens affects investors
For investors and wholesalers, a lis pendens on a target property is a significant obstacle but not necessarily a deal-killer. Properties with lis pendens filings can sometimes be acquired at deep discounts because the owner is motivated to resolve the situation. However, the deal can't close through normal channels until the lis pendens is removed, which requires either resolving the underlying lawsuit or getting a court order to expunge the notice.
Lis pendens also serve as a source of deal leads. Monitoring county records for new lis pendens filings -- particularly foreclosure-related ones -- identifies property owners in financial distress. These owners are often motivated sellers who may be willing to negotiate a sale that resolves the underlying debt and avoids foreclosure. This is essentially the pre-foreclosure investing strategy.
Removing a lis pendens
A lis pendens can be removed in several ways. The most straightforward is resolution of the underlying lawsuit -- once the case is settled or dismissed, the filing party records a release of lis pendens. If the lis pendens was filed improperly or without a valid basis, the property owner can petition the court to expunge it. Some states require the filing party to show a "real property claim" -- a genuine legal basis for claiming an interest in the property -- or face sanctions and attorney's fees.
In Texas, the Property Code provides a mechanism to challenge a lis pendens. The property owner can file a motion to expunge, and the burden shifts to the filer to demonstrate a probable right to the property interest claimed. Courts may also require the filer to post a bond. This process typically takes 30-90 days and requires legal counsel.
For investors looking to acquire a property with a lis pendens, the typical strategy is to negotiate directly with both parties to the lawsuit. If you can structure a deal that satisfies the claimant's interest and the owner's need for a sale, both parties may agree to dismiss the case and release the lis pendens, clearing the way for your transaction to close.