Laying Down the Law – When you should file a Lis Pendens
Inside the Arizona New Home Industry
February 1, 2023
A Lis Pendens Notice can be a powerful tool under Arizona law, but it is a narrow tool available only in limited circumstances. Therefore, before you record a Lis Pendens about a pending lawsuit concerning real estate, you must understand the limitations of a Lis Pendens and the consequences of filing a wrongful Lis Pendens. An Arizona real estate lawyer can answer your questions about a Lis Pendens and assist you with all other real estate law matters.
Defining a Lis Pendens Notice
A Lis Pendens is a written notice recorded in the recorder’s office in the county where the real estate is located. Essentially, a Lis Pendens gives notice to the public that a lawsuit concerning legal title to a parcel of real estate has been filed in court and is currently pending. However, you can only record a Lis Pendens notice in very narrow circumstances. Specifically, a lawsuit concerning title to the real estate must already be on file with a court. Furthermore, the lawsuit must not only involve real estate, but it must directly involve a claim that may affect the title of that real estate.
The Purpose of a Lis Pendens Notice
The overall purpose of a Lis Pendens is to warn innocent third parties of pending lawsuits concerning title to real estate. This notice prevents the real estate owner from encumbering the property with a loan or transferring the real estate to third parties who have no knowledge of the pending dispute over the title to the real estate. For instance, suppose that a seller signs a contract to sell a parcel of real estate to a buyer. However, the seller refuses to honor the contract and sell the property for whatever reason. The buyer then files a lawsuit against the seller for specific performance, asking that the court force the seller to complete the proposed real estate transaction.
The Standard for Determining Whether a Lis Pendens is Appropriate
Recording a Lis Pendens is appropriate in clear disputes over the title to real estate. However, in other types of lawsuits concerning real estate, whether a Lis Pendens notice would be warranted is unclear. For instance, if a landlord fails to return a tenant’s security deposit at the end of a lease, and the tenant files suit against the landlord, the only issue in the lawsuit is money, not title to the real estate. In that instance, the tenant could not file a Lis Pendens against the landlord’s real estate because the tenant has no claim to the real estate title.
The operative standard determining whether a Lis Pendens is warranted generally is whether the pending lawsuit “may affect” the title to the real estate. There must be some basis that the lawsuit is one in which a judgment issued by the court would expand, restrict, or otherwise affect the property owner’s rights to the title.
Recording an Improper Lis Pendens Notice
Understanding the parameters of when recording a Lis Pendens is critical because an improper Lis Pendens recording can lead to liability. For example, a Lis Pendens clouds title to real estate and can impede the owner’s ability to sell or otherwise transfer the real estate. For example, if the owner loses opportunities to sell the real estate due to an unwarranted Lis Pendens recorded concerning the real estate, the owner could use you for damages.
A.R.S. § 33-420 provides that anyone who records a document that purports to claim an interest in, or a lien or encumbrance against, real property and who knows or has reason to know any of the following can face specific penalties:
- The document is forged
- The document is groundless
- The document contains a material misstatement
- The document contains a false claim, or
- The document is otherwise invalid
In this situation, the owner or the beneficial title holder to the property can recover $5,000 or triple the actual damages caused by the recording of the document, whichever is greater, plus reasonable attorney fees and costs. Therefore, you must proceed cautiously and ensure that you are within your legal rights if you are contemplating recording a Lis Pendens notice.
We Are Here to Assist You with Your Arizona Real Estate Dispute or Transaction
If you or someone you know has questions regarding this new ordinance, or any other issue involving short term rentals, including how to obtain a short-term rental agreement, call our office today at 480-388-3348 or online to schedule a consultation with Christopher J. Charles.
Christopher J. Charles is the Founder and Managing Partner of Provident Law ®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS ® (the “AAR”). In 2017, Mr. Charles obtained one of the Top Ten Civil Verdicts for his client in a real estate dispute. Mr. Charles holds the AV ® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions. Christopher regularly teaches continuing education classes at the Arizona School of Real Estate and Business, and he can be reached at Chris@ProvidentLawyers.com or at 480-388-3343.