‘Lis Pendens’ is a Latin term that translates to “pending litigation.” And in real estate, it refers to a notice that a legal dispute involving a property has been filed. Essentially, this alerts buyers or lenders to a legal dispute over the property, which can indicate a potential risk for property ownership or transfer. If this happens, you might want to consult a lawyer for legal advice or a financial advisor to evaluate the impact that it can have on your finances.
How Lis Pendens Works
The lis pendens process is initiated when a lawsuit involving the property is filed. A notice is subsequently recorded in the county where the property stands. This sets off a warning bell for potential buyers or lenders about ongoing legal concerns. It can help potential buyers know that there is a complication in buying the property so that they could evaluate the risk of investing in a property that someone else might have a claim to.
The repercussion of lis pendens also resonates deeply with the filer and the receiver. For the filer, lis pendens places a ‘cloud on the title’, which is a term used to describe any irregularity in the chain of title of property. This will alert others about their claim on the property. Meanwhile, for the receiver, a lis pendens can make the property difficult to sell or refinance until the issue gets resolved.
When Lis Pendens Is Typically Used
Lis Pendens typically finds its place in legal disputes involving real estate. These can include divorce, contract disputes and mortgage default. As an example, consider a divorce case where one spouse may file a lis pendens to block the other from selling the property before its division is settled by the court. They undertake this step to ensure that the property, which is a significant asset, remains intact.
In situations of mortgage default, a lender may resort to filing a lis pendens at the beginning of a foreclosure process. This will alert interested parties that the lender is pursuing legal remediation for the unpaid debt. As a result, this could also indicate the property may soon open itself up for sale.
How to File a Lis Pendens
The act of filing a lis pendens requires the preliminary step of filing a lawsuit involving the property. Preparation and recording of a lis pendens notice at the county recorder’s office follow suit, which puts everyone on notice of the pending legal matter. This notice encapsulates details of the lawsuit, the parties entwined and the property in question.
However, one cannot ignore the legal considerations hitched to filing lis pendens, which involves ensuring the lawsuit is deeply entwined with the property and an understanding that an erroneous filing could lead to a slander of title claim. Potential filing hindrances may take the shape of the cost of filing and potential counterclaims from the property owner.
What to Do If You Receive a Lis Pendens
Receiving a lis pendens can be daunting, at which point immediate consultation with a real estate attorney could be beneficial to comprehend the implications and formulate a response line. It is critical to approach professional legal advice when confronted with a lis pendens as it can echo significant repercussions on property rights. These may include resolving the lawsuit, having the lis pendens expunged or terminated, or losing rights to the property.
Amid these legal repercussions, a financial advisor can become useful, offering guidance for sound financial management during these conflicts. Simultaneously, an advisor can provide strategic approaches toward mitigating the possible financial impact of lawsuits, showing a fuller, clearer picture of the financial landscape and ramifications. However, any legal questions should be directed at a lawyer.
Additionally, the impact of a lis pendens on the value of the property could be substantial. Potential buyers may be deterred, making the property less marketable. And the legal dispute itself could also directly impact the property’s value.
A lis pendens can make or break real estate transactions. Therefore, you should carefully consider the legal and financial consequences involved with buying or selling a property when this notice is issued.
Tips for Real Estate Investing
- A financial advisor can help you when you’re thinking about investing in real estate. You can use their expert guidance to find potential properties and manage your overall investment plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- One thing every real estate investor might want to consider is finding financial partners to fund the deals. Here is where you can get started in looking.
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