Lis Pendens - A Powerful but Sometimes Abused Tool for Real Estate Lien Placement

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

The term Lis Pendens literally means "a suit pending" in Latin.  In practice, a Lis Pendens is nothing more than a publicly-recorded, written notice that a lawsuit has been filed which concerns the title to certain real estate or some interest in that real property. 

Legal writers have traced the concept / doctrine of the Lis Pendens back to Lord Francis Bacon --  a 1600's Renaissance Man, crown official and British legal scholar. Cases discussing the doctrine appear in common law, and historical decisions of the courts of the US colonies and American federal courts.

In Texas, the Lis Pendens doctrine has been codified, and can now be found in Section 12.007 of the Texas Property Code. Subsection (a) of Section 12.007 outlines the purpose of a lis pendens in Texas, and provides:

(a) After the plaintiff's statement in an eminent domain proceeding is filed or during the pendency of an action involving title to real property, the establishment of an interest in real property, or the enforcement of an encumbrance against real property, a party to the action who is seeking affirmative relief may file for record with the county clerk of each county where a part of the property is located a notice that the action is pending.

Under common law, the lis pendens (or notice of pending action) is filed with the clerk of the court, certified that it has been filed, and then recorded with the County Recorder, who would index the filing. This procedure -- which appears in Texas law at Section 12.007(c) -- gives notice to the defendant who owns real estate that there is a claim on the property, and the recording informs the general public (and particularly anyone interested in buying or financing the property) that there is this potential claim against it. This effect of the Lis Pendens filing is echoed in Texas Property Code Section 13.004  (Yes, Thirteen), which states:

Sec. 13.004. EFFECT OF RECORDING LIS PENDENS. (a) A recorded lis pendens is notice to the world of its contents. The notice is effective from the time it is filed for record and indexed as provided by Section 12.007(c), regardless of whether service has been made on the parties to the proceeding.

The lis pendens then acts as both a notice, and a lien against the affected property, because recording a lis pendens defeats a subsequent purchaser's claim to have purchased encumbered property "innocently," or as a bona fide purchaser who was unaware of the title claim.

In order for a Lis Pendens to have the effect prescribed by Section 13.004, it must contain all information and elements prescribed by Section 12.007(b):

(b)  The party filing a lis pendens or the party's agent or attorney shall sign the lis pendens, which must state:
(1)  the style and number, if any, of the proceeding;
(2)  the court in which the proceeding is pending;
(3)  the names of the parties;
(4)  the kind of proceeding;  and
(5)  a description of the property affected

In addition, the person filing the Lis Pendens in Texas  MUST -- within 3 days after filing the notice with the Clerk -- serve a copy of the notice to each party to the underlying suit "ho has an interest in the real property affected by the notice."  See Tex.Prop.Code Section 12.007(d).

Filing a Lis Pendens is relatively easy in Texas.  As a result, litigants and their lawyers (especially those unfamiliar with real estate law) often file lis pendens notices to encumber real property when title to the property is not affected by a given lawsuit. In these instances, the lis pendens can create an unnecessary burden on real estate that is not implicated by a lawsuit.  Fortunately, this abuse of the lis pendens process can have consequences.

The Texas Property Code sets-out procedures (in two separate statutes) for both canceling, and expunging improper lis pendens filings.  (NOTE:  I intend to write a future entry on this blog about the lis pendens removal process)

In addition, Section 12.002 of the Texas Civil Practices and Remedies Code prescribes harsh penalties, including damages (in the minimum amount of $10,000.00), attorneys' fees and costs for the making or use of a fraudulent lien or claim against real property.  Finally, there may exist a separate cause of action for slander of title, which could lead to the recovery of attorneys' fees and damages from a person improperly liening real property through recording a lis pendens in bad faith. 

Stated simply, just because two parties are warring in the courts, a lis pendens shouldn't be filed unless that war's outcome affects actual title or ownership of the real estate identified in the lis pendens notice. A lis pendens has a specific, defined scope, and should be limited to the instances described in in Section 12.007 (a), above.