Buying and selling real estate is a big event for any person or business. It involve a lot of money and paperwork. Due diligence is vital to a successful closing. Buyers (and their lender) need to be confident that the sellers can provide good title to the land. If not, the buyer may have to quiet title to the land or sue the seller on a seller's disclosure claim.
As a real estate litigation attorney, I can tell you that a “Notice of Lis Pendens” is not something you want to find on the title to your land. A Notice of Lis Pendens means that there is a pending lawsuit regarding the land.
If you come across a Notice of Lis Pendens, stop and immediately review it. You could have a major problem if you close on a sale of the land without addressing it.
1. What is a "Notice of Lis Pendens"?
A Notice of Lis Pendens is a document that is filed with a County Recorder's Office in Minnesota to show that there is a pending lawsuit in court regarding that land. “Lis Pendens” is Latin for “lawsuit pending” or “litigation pending.”
Here is a description from a Minnesota court:
[T]he sole function of [a] lis pendens is to give constructive notice to all the world of the pendency of [an] action, which is, alone, notice to all persons of the rights and equities of the party filing the lis pendens in the land therein described.
Trask v. Bodson, 141 Minn. 114, 117, 169 N.W. 489, 490 (1918); see also Bly v. Gensmer, 386 N.W.2d 767, 769 (Minn. Ct. App. 1986) (notice of lis pendens is a “warning that title to property is in litigation and impedes a property owner's right to free alienability of real estate.”).
The purpose of a Notice of Lis Pendens is to put potential buyers or other persons on notice that there is a legal dispute regarding that land. There may be a bank foreclosure, mechanic's lien foreclosure, boundary dispute, or an ownership dispute.
Because legal actions affect a potential buyer's investment in the land, it's important that he or she have good information when buying the land. For this reason, it is standard procedure for a buyer, title company, closing company, or lawyer for the buyer to review the recorded documents to see if there is a title issue. A Notice of Lis Pendens is a title concern that must be understood before closing.
2. What Does a Notice of Lis Pendens Look Like?
A Notice of Lis Pendens is a simple document with basic information. Most are drafted using a basic template, but with some customized language. The Summons, Complaint, and other documents in the lawsuit are not generally recorded, so you will have to do further research to learn the details about the case.
Below is a Notice of Lis Pendens template that is sometimes used in Minnesota. (Note: do not use this template unless you are certain that it is appropriate for your situation.)
3. What Does A Notice of Lis Pendens Tell You?
It tells you several things about the legal action, including:
- The Court and Case Number: This is important because it tells you where to get more information about the legal action. You can review documents at the court, request copies of documents, attend any court hearings, and otherwise track the case. You can also check the status of the case by going to the Minnesota Court Access website to find the Register of Actions.
- The Parties: This is useful because if you have any deals going with parties involved in the action, you could be impacted. The parties are persons that you may have to contact if you intend to buy or take other action on the property. For example, if the plaintiffs win their lawsuit regarding the land, they may have an ownership interest that you may have to address (i.e., they might be a proper seller if you want to buy the land).
- The Attorneys: Attorneys are the point of contact for a party involved in a legal dispute. If you have an interest or concern about the property, you may need to contact the attorney involved in the action. The attorney may be in position to provide you with information that may not be apparent in the Notice of Lis Pendens or the court record (if the client approves the disclosure).
- The Nature of the Proceeding: The party filing the Notice of Lis Pendens usually must list the purpose of the legal action. The party may list a general reason for the action (foreclosure, lien, quieting title, etc.), or they may list the legal claims (adverse possession, action to determine adverse claims, trespass, etc.). This might give you enough information to make an informed decision, whether it be buying the land or avoiding it.
- The Land: The Notice of Lis Pendens must specify the land related to the lawsuit. While it may list the property address or tax ID number (which is a helpful starting point for non-lawyers), it might only have the legal description. If it only lists the legal description, you may have to compare it to the legal description in your records, do further research at the Recorder's Office, or contact an attorney. It is possible that several parcels of land are impacted by the case or only a part of one parcel, so it's useful to understand what land is affected. A proper Notice will give you this information.
4. What Happens If You Fail To Record A Notice of Lis Pendens?
There is a chance that you may not suffer any consequence, especially if the law does not require a Notice in your situation and there are no liens or transactions regarding the land. However, it is more likely that failing to record a Notice of Lis Pendens where required could cost you an interest in land, or a claim against the land.
A Notice of Lis Pendens protects potential buyers by warning them of legal action. If you start a lawsuit but fail to record the Notice, a potential purchaser will not know about the court action. If they buy the property, their purchase may be valid. If so, their interest may be superior to your interest. They might be the true owner of the property as a “bona fide purchaser” that had no notice of your pending lawsuit. However, if a potential buyer had constructive notice of a lawsuit (even without seeing the Notice of Lis Pendens), they probably will not be a “bona fide purchaser.” This may be a litigated issue for a judge to decide, so you want to avoid the problem by properly recording the Notice.
A Notice of Lis Pendens also protects people that make claims against land. If the claimant fails to file the Notice, the person could lose the claim against the land. For instance, a contractor could lose a mechanic's lien claim under Minn. Stat. § 514.12 by failing to record the Notice of Lis Pendens. There may be similar consequences with other types of claims.
The lesson is to review the relevant law and make sure you do it right. While people might be able to handle some legal issues themselves, a Notice of Lis Pendens has real consequences if not done properly. A real estate litigation attorney should be familiar with the requirements of the Notice of Lis Pendens for your circumstances.
5. What Happens If You Buy Land That is Affected By a Notice of Lis Pendens?
Few good things will happen. Here are some consequences of ignoring the Notice:
- You could lose the land to a "bona fide purchaser".
- You have no interest in the land and lose the money you paid to a seller, as the seller lacked a proper interest to convey to you.
- You bought the property subject to liens or other claims, so you must address those liens or claims by defending lawsuits.
- Your land does not have the boundaries you expected.
- Your rights to the land are limited by rights of others (such as an easement that limits your usage of the lake or a driveway).
- Your title insurance may not cover a problem with the title to your land.
- You may have to deal with the uncertainty, stress, and expense of dealing with a legal problem relating to the land.
Note that some of these consequences may be lessened by claims you could bring against a seller. You may have a claim for misrepresentation, if the seller failed to disclose a legal action on the property. On the other hand, if you ignored the Notice of Lis Pendens or bought despite the issue, your claim may have some weaknesses.
6. Can I Still Buy Land While Legal Action is Pending?
Yes, depending on your situation. Sometimes the case will have little or no impact on your interest as a potential buyer.
If there are continuing risks related to a Notice of Lis Pendens, there are ways to structure a real estate transaction to protect the buyer. Perhaps the seller will pay off the claimant before your closing or will “indemnify” you for any liability from the Notice of Lis Pendens lawsuit. There may be discussion of an “assignment of rights”, “substitution of parties”, “indemnification”, “hold harmless”, “reimbursement”, or “contribution” clause as part of a discussion with the seller. There can be ways to protect the buyer.
On the other hand, the seller may want the buyer to “step into his shoes” and defend the pending action (or prosecute claims the seller has brought to protect the land). This can be risky, and a title insurer may decline to offer you a policy. The buyer must “do the homework” and understand the risks before closing so that he or she is protected. If this issue comes up, you may want to speak to an attorney to understand the risks and protect yourself through a proper Purchase Agreement.
7. How Do I Remove a Notice of Lis Pendens That Affects My Property?
Generally, the person that recorded the Notice must be the one to remove it. If you think it was improperly filed or the legal proceeding is finished, ask the person to voluntarily “discharge” it.
Here is a Discharge of Notice of Lis Pendens template used in Minnesota. (Note: do not use it unless you know it is appropriate for your situation).
If the person is unwilling to cooperate with a discharge, you may have to sue him and get a judge to discharge the Notice of Lis Pendens. A person may have grounds under Minn. Stat. § 557.02 or other laws to have the Notice discharged. A judge may be able to issue an Order for you to record, or the judge may require the other person to discharge it (or else face contempt of court). You may also be entitled to damages if the person has prevented a sale from happening or has “slandered the title” to your land.
8. When Does a Notice of Lis Pendens “Slander Title” to Land?
“Slander” basically means that the Notice of Lis Pendens has made a false statement about the land and has harmed the owner.
Here are the four elements of a slander-of-title claim:
(1) a false statement concerning real property owned by the plaintiff,
(2) the false statement was published to others,
(3) the false statement was published maliciously, and
(4) the publication of the false statement caused the plaintiff loss in the form of special damages.
Paidar v. Hughes, 615 N.W.2d 276, 279-80 (Minn. 2000). “The filing of an instrument known to be inoperative is a false statement that, if done maliciously, constitutes slander of title.” Id. at 280. But if an individual files an instrument—like a notice of lis pendens—which he has a right to file, he does not commit slander of title. Kelly v. First State Bank of Rothsay, 177 N.W. 347, 347 (Minn. 1920). In slander-of-title claims, “malice requires a [r]eckless disregard concerning the truth or falsity of a matter . . . despite a high degree of awareness of probable falsity or entertaining doubts as to its truth.” Brickner v. One Land Dev. Co., 742 N.W.2d 706, 711-12 (Minn. Ct. App. 2007) (quotation omitted), review denied (Minn. Mar. 18, 2008).
Most attorneys are careful enough to avoid this issue, usually by conducting basic research on the recorded documents and the potential claim against the landowner. However, if an attorney or some other person wrongfully files a Notice of Lis Pendens, you as the landowner may have a slander claim or other claims.
9. What Minnesota Statutes Govern Notices of Lis Pendens?
There are several statutes that discuss Notices of Lis Pendens, as well as case law from Minnesota appeals courts. The issue comes up in several different contexts, such as home foreclosures, mechanic's liens, other lien foreclosures, quiet title actions, and other real estate contexts.
557.02 NOTICE OF LIS PENDENS.
In all actions in which the title to, or any interest in or lien upon, real property is involved or affected, or is brought in question by either party, any party thereto, at the time of filing the complaint, or at any time thereafter during the pendency of such action, may file for record with the county recorder of each county in which any part of the premises lies a notice of the pendency of the action, containing the names of the parties, the object of the action, and a description of the real property in such county involved, affected or brought in question thereby. From the time of the filing of such notice, and from such time only, the pendency of the action shall be notice to purchasers and encumbrancers of the rights and equities of the party filing the same to the premises. When any pleading is amended in such action, so as to alter the description of, or to extend the claim against, the premises affected, a new notice may be filed, with like effect. Such notice shall be recorded in the same manner in which mortgages are recorded, and may be discharged by writing executed and acknowledged in the manner of conveyance. The filing of such lis pendens at the time of filing the complaint and before the commencement of the action shall have no force, effect, or validity against the premises described in the lis pendens, unless the filing of the complaint is followed by the service of the summons in the action within 90 days after the filing of the complaint therein. Any party claiming any title or interest in or to the real property involved or affected may on such notice as the court shall in each case prescribe, make application to the district court in the county in which the action is pending or in which the real property involved or affected is situated, for an order discharging the lis pendens of record, when any such action has not been brought on for trial within two years after the filing of the lis pendens and in case the court orders the lis pendens discharged of record upon the filing of a certified copy of the order of the court in the office of the county recorder, where the real property is situated, the lis pendens shall be void and of no force nor effect.
Things to Note About the Statute
- A Notice of Lis Pendens may be appropriate when the legal dispute involves or brings into question “the title to, or any interest in or lien upon, real property[.]” Suing a person that owns land is generally not enough to justify a Notice. There must be something specific about your claim that relates to the land (for example, a boundary dispute or otherwise quieting title to the land).
- The Notice should be recorded in the “same manner” as mortgages are recorded. Practically speaking, this means that you need to format it properly and include the necessary information (such as the legal description) for the Recorder's Office. If something is lacking, the Recorder's Office could reject the Notice.
- The statute contemplates that a party will start the Court action, and then record the Notice of Lis Pendens. However, the statute suggests that a party could record the Notice as long as the summons is served within 90 days. The statute also indicates that a party should record an Amended Notice where necessary (i.e., something in the lawsuit changes the accuracy of the initial Notice).
- The Notice could be void if a court discharges it or if the party has not brought the case “on for trial” within 2 years after recording it. This protects the landowner and limits the time in which the Notice impairs the land. To this end, there is a 10-year limit for the effectiveness of a Notice (see Minn. Stat. § 557.021).
Other Statutes Involving Notices of Lis Pendens
- Mechanic's lien foreclosures (Minn. Stat. § 514.12)
- Invalidating a home foreclosure (Minn. Stat. § 580.041)
- Attorney's liens (Minn. Stat. § 481.13)
- Registering Torrens property (Minn. Stat. § 508.11) (application to register title basically serves as the Notice of Lis Pendens)
- Receiverships involving land (Minn. Stat. § 576.30)
- Right of first refusal on agricultural land (Minn. Stat. § 500.245)
- Action on tax-forfeited lands (Minn. Stat. § 284.08)
10. What Should I Do If a Notice of Lis Pendens Impacts My Land?
Get a handle on the issue, do your research, take necessary action, and do it promptly.
If you own the land, you have probably been served already with the lawsuit involving your land. If the Notice of Lis Pendens is a surprise to you, you should investigate it. You may want to contact the person that filed it, in case it is a mistake (in which case they should discharge it). If it was intentional, you should get a copy of the Summons and Complaint (and respond quickly to Answer the Complaint). If there is no basis for the Notice, you can warn the person that you will consider legal action against them for slandering the title to your land. You should also put your title insurance company on notice of a potential claim and see if they will cover it. Additionally, you may want to speak to an attorney to figure out how to resolve the issue that prompted the Notice.
If you are a prospective purchaser of land, you should speak with your realtor, closing company, potential title insurer, attorney, and the seller about a Notice on land that you intend to buy. The seller should disclose this to you, and should answer any questions you have. It may not hurt to review any court filings, and it may even help to contact the person that filed the Notice (or the attorney). This might tell you something new about the land or the seller.
If necessary, it may make sense to push back the closing until the issue is resolved or even cancel the purchase agreement (if one has been signed). If the seller failed to disclose the problem, they should return your earnest deposit when the purchase agreement is cancelled. Before you cancel, make sure you follow the Purchase Agreement procedure for cancelling. You do not want to breach the Purchase Agreement by wrongfully or improperly cancelling it.
If you bought land for which a Notice was later recorded, you may need an attorney to sort out the issue. You don't want to lose your rights to the land. You may even have to defend a foreclosure or other claim against the property as the owner. If the seller gave you a Warranty Deed, that might give you some protection. If you have title insurance, you might have further protection. You should figure out if the seller caused the issue and, if so, compel them to defend the action.
For a Notice of Lis Pendens, the best protection is doing your due diligence before you purchase real estate. This means reviewing the recorded documents yourself, or making sure that others acting on your behalf have done their jobs (closing agents, title examiners, lawyers, etc.). If you nonetheless have legal issues to resolve, it may be best to speak to a real estate litigation attorney to understand your rights.