Tag Archives: property

What in the World Is a Lis Pendens?

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photo by Bjoertvedt

MoneyTips.com (via NBC news affiliate NewsWest 9) quoted me in Should I Worry About A Lis Pendens in A Title Report? It opens,

Is there anyone this side of a Supreme Court Justice who hasn’t signed off on a document without reading or understanding every single word and Latin phrase? When it comes to buying a house, it pays to know the phrase “lis pendens”.

A lis pendens is the Latin term for a Notice of Pendency of Action. It means that a lawsuit is pending against the title of a property. The lis pendens is a public notice letting buyers know there is a dispute over the ownership of the property. It is filed in the county clerk’s office wherever the title of the actual property is listed.

Anyone willing to purchase property under a lis pendens is subject to the outcome of the lawsuit. This is why you should be worried if you discover a lis pendens on a title report, says David Reiss, a former private practice real estate attorney who is now the Academic Program Director at the Center for Urban Business Entrepreneurship (CUBE) at Brooklyn Law School.

“Depending on the underlying action that is the subject of the lis pendens, ownership of the property might be at issue. If one of the parties of the underlying litigation wins, they may own the property,” Reiss explains. And if they own it, that means you don’t.

For buyers, a lis pendens should throw up many red flags. Lenders are usually unwilling to finance a mortgage until the lis pendens has been removed from the title. In addition, while a property can still be sold while there is a lis pendens, title companies will not insure the property, and that alone should be a deterrent to purchasing.

A lis pendens can be placed on a property for a variety of reasons. It could be due to divorce proceedings, an inheritance issue over a property held in estate, taxes owed to the IRS, or the property could be about to go into foreclosure. There could even be criminal fines owed.

“A lis pendens can be time-consuming and aggravating at best,” says Denise Supplee, a realtor and Co-Founder and Director of Operations at Spark Rental. “That being said, it is possible to move beyond these. Depending on state laws, there are steps that can be taken to have these attached lawsuits removed. However, there may be a cost of an attorney and definitely a loss of time.”

Because a lis pendens can only be about the property itself and not about the parties who have an interest in the property, there are two ways the lis pendens can be expunged, says Reiss. The first is “if the lis pendens really has nothing to do with the property and should never have been there in the first place, you can fight it,” because a lis pendens is a powerful tool that is often subject to abuse. The second is if the parties involved ultimately resolve the lawsuit.

Monday’s Adjudication Roundup

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Wednesday’s Academic Roundup

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Wednesday’s Academic Roundup

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Wednesday’s Academic Roundup

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Wednesday’s Academic Roundup

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Bank Break-ins

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"Balaclava 3 hole black" by Tobias "ToMar" Maier. Licensed under CC BY-SA 3.0 via Wikimedia Commons - https://commons.wikimedia.org/wiki/File:Balaclava_3_hole_black.jpg#/media/File:Balaclava_3_hole_black.jpg

Chris Odinet has posted Banks, Break-Ins, and Bad Actors in Mortgage Foreclosure to SSRN. The abstract reads,

During the housing crisis banks were confronted with a previously unknown number mortgage foreclosures, and even as the height of the crisis has passed lenders are still dealing with a tremendous backlog. Overtime lenders have increasingly engaged third party contractors to assist them in managing these assets. These property management companies — with supposed expertise in the management and preservation of real estate — have taken charge of a large swathe of distressed properties in order to ensure that, during the post-default and pre-foreclosure phases, the property is being adequately preserved and maintained. But in mid-2013 a flurry of articles began cropping up in newspapers and media outlets across the country recounting stories of people who had fallen behind on their mortgage payments returning home one day to find that all of their belongings had been taken and their homes heavily damaged. These homeowners soon discovered that it was not a random thief that was the culprit, but rather property management contractors hired by the homeowners’ mortgage servicer.

The issues arising from these practices have become so pervasive that lawsuits have been filed in over 30 states, and legal aid organizations in California, Florida, Michigan, Nevada, and New York report that complaints against lender-engaged property managements firms number among their top grievances. This Article analyzes lender-engaged property management firms and these break-in foreclosure activities. In doing so, the paper makes a three-part call to action, which includes the implementation of bank contractor oversight regulations, the creation of a private cause of action for aggrieved homeowners, and the curtailment of property preservation clauses in mortgage contracts.

This is a timely article about a cutting edge issue. All too often I have heard pro-bank lawyers claim that banks almost never foreclose improperly. The news reports and lawsuits discussed in this article counter that claim. And yet, I hope that some empirically-minded person could quantify the frequency of such misbehavior to better inform policymakers going forward.