Lis Pendens

Definition

Lis Pendens is a Latin term that translates to “litigation pending.” This term is used in the real estate industry to indicate that a property is under legal dispute, possibly due to issues like foreclosure, divorce, inheritance, or unpaid taxes. As a result, the property’s title may be unclear, affecting potential sales or investments.

Phonetic

The phonetics of the keyword “Lis Pendens” is: /lɪs ˈpɛndɛnz/

Key Takeaways

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1. Lis Pendens Notice: Lis pendens, which is Latin for “suit pending,” is a legal term used to indicate that a specific property is involved in an ongoing legal dispute. It acts as a notice to potential buyers or lenders that the property’s ownership is in question.
2. Effect on Transactions: Once a lis pendens has been filed, it usually prevents the owner from selling the property or securing a mortgage on it until the legal issue is settled. This is because any purchaser or lender taking an interest in the property post-lis pendens will typically be bound by the outcome of the pending litigation.
3. Removal of Lis Pendens: A lis pendens can be removed or cancelled only by court order, through dismissal of the case, or if the filer releases the lis pendens. If the property owner believes the lis pendens was wrongly filed, they can file a motion to expunge it. The court will then decide based on the validity of the underlying claim.

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Importance

Lis Pendens, a Latin term meaning “lawsuit pending,” plays a significant role in business/finance as it is a written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Its significance lies in alerting potential purchasers or lenders that the property’s title is under legal dispute. It notifies them about potential risks associated with the purchase or the lending of money against the property. In effect, the filing of Lis Pendens can limit the property owner’s ability to sell or refinance the property until the legal dispute is resolved, thereby ensuring that properties under dispute are not unjustly disposed of before the relevant legal proceedings are concluded.

Explanation

The Latin term “Lis Pendens” translates to “a suit pending,” and in the context of finance or business, it plays a crucial role in real estate transactions. The primary purpose of a Lis Pendens is to provide public notice that a property is involved in a legal dispute, or in other words, that there’s a pending lawsuit that implicates the property. This can include a variety of legal issues, such as foreclosures, divorces, inheritances, or contract disputes, among others. The filing of Lis Pendens implies that any outcome of the legal proceedings could affect the property or the ownership and rights tied to that property, which is vital information for potential buyers or lenders.One of the major uses of a Lis Pendens is in preventing the unnotified transfer of a property embroiled in a legal contest. It acts as a warning to prospective buyers or financial institutions by casting a cloud on the title, which can deter most from proceeding with any transactions until the legal proceedings are resolved, or else they risk inheriting the underlying litigation related to that property. This ensures that the potential buyer or financier is fully informed about the ongoing litigations associated with the property, protecting their interests and ensuring fair dealings. In this way, Lis Pendens maintains transparency and minimizes the possibility of fraudulent activities in real estate transactions.

Examples

1. Real Estate Disputes: A common example of Lis Pendens in the real world relates to real estate disputes. Let’s say person A sells a property to person B, but after the transaction, person C comes forward claiming they have a prior right to the property. Person C can file a Lis Pendens notice which serves to notify potential buyers or lenders that there’s a dispute over the property. Until the dispute is resolved, this can prevent the property from being sold or refinanced.2. Divorce Proceedings: During a divorce proceeding, one party may file a Lis Pendens to prevent the other party from selling off shared property before the division of assets has been finalized by the court. 3. Contractor Disputes: If a property owner decides to halt payment to a contractor during the construction due to dispute, the contractor can place a Lis Pendens on the property. This can prevent the owner from selling or refinancing the property until the dispute is resolved and paid. This legal claim warns potential buyers that the legal title is in question.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Real Estate Litigation
• Foreclosure Process
• Property Rights
• Public Notice
• Judicial Lien

Sources for More Information

• Investopedia
• Nolo
• The Free Dictionary – Legal Dictionary
• The Balance