Recording a Notice That Litigation Affects Title

Recording a notice of pendency costs a filing fee. It requires no bond in most states, no hearing before it takes effect, and in the majority of jurisdictions no judicial approval at all. What it does is make the property unsellable and unfinanceable for the life of the litigation, because no title insurer will write over it. Among prejudgment remedies that is an unusual ratio of effect to effort, and the law has spent decades trying to manage it.

What the notice does to a sale

The mechanism is constructive notice. New York provides that the pendency of a qualifying action is constructive notice, from the time of filing of the notice only, to a purchaser from or an encumbrancer against any defendant named in a notice indexed against the block or the name. A person whose conveyance or encumbrance is recorded after the filing is bound by all proceedings taken in the action after that filing to the same extent as a party.

Florida frames the same idea from the other direction. An action operates as a lis pendens on property involved in it only if a notice is recorded in the county where the property is located and the notice has not expired, been withdrawn or been discharged. An action for specific performance or one not based on a duly recorded instrument has no effect on title, except between the parties, unless a notice has been recorded.

The practical result is uniform even where the drafting differs. Because a buyer would take subject to whatever the court eventually orders, and because that risk is uninsurable, transactions stop. Owners discover the notice when a closing collapses rather than when it is filed.

Which claims support a notice

This is where most disputes are decided. California defines a real property claim as the cause or causes of action in a pleading which would, if meritorious, affect title to or the right to possession of specific real property, or the use of an identified easement other than one obtained by a regulated public utility under statute. A money claim, even a large one against a property owner, does not qualify.

The distinction is easy to state and frequently evaded. Plaintiffs with contract or fraud claims have sometimes added a request for a constructive trust or an equitable lien over the defendant's real estate in order to manufacture a real property claim. Courts examine whether the pleading genuinely seeks relief affecting the specific property or whether the property is simply where the defendant's money happens to be.

New York's formulation is broader in wording and similar in application. A notice may be filed in an action in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property, excluding a summary proceeding to recover possession. The same screening question arises: would the judgment sought actually operate on this parcel.

A related screening question is whether the notice names the right property and the right parties. Statutes require the notice to contain the names of all parties to the action and a description of the property affected. A notice that describes a larger parcel than the claim reaches, or that names an entity no longer holding title, is vulnerable on its own terms without any inquiry into the merits of the underlying claim.

Removing the notice

California puts the burden on the claimant, which is the sharpest departure from the ordinary rule. Any party, or a nonparty with an interest in the property who obtains leave to intervene, may apply to expunge. The court must order expungement if it finds the pleading does not contain a real property claim, and must also order it if the claimant has not established by a preponderance of the evidence the probable validity of that claim. In neither case may an undertaking be required as a condition of expunging.

New York uses a list instead. Cancellation is mandatory where service of the summons was not completed in time, where the action has been settled, discontinued or abated, where the time to appeal from a final judgment against the plaintiff has expired, or where enforcement of such a judgment has not been stayed. Cancellation is discretionary where the plaintiff has not commenced or prosecuted the action in good faith, and the court may direct the plaintiff to pay the costs and expenses occasioned by the filing and cancellation.

Two routes bypass the court entirely in New York. A notice is canceled by the clerk without an order on the filing of an attorney's affidavit and a stipulation signed by all appearing defendants, and also where an affidavit shows there have been no appearances and the time to appear has expired. Either is faster than a motion, and both are worth checking before one is filed.

Duration, and where the device sits

Time limits matter because they are unforgiving. A New York notice is effective for three years from filing, and the court may grant an extension for a like additional period on motion for good cause, but the extension order must be filed, recorded and indexed before the prior period expires. A claimant that lets the period lapse cannot restore it retroactively, and in a long-running title dispute that is a serious loss.

Where a claim does not affect title, the alternatives are the money-securing remedies. Attachment of real property is available in some states on the grounds described in the account of attachment and the grounds it requires, and it comes with the bond and hearing requirements a notice avoids. Whether a plaintiff can obtain either turns on the protections described in the hearing owed before property is frozen.

Defendants facing a notice should also consider what else may follow. A plaintiff that records against real estate often seeks other relief at the same time, and the routes for challenging those are treated in the motion to dissolve a writ already issued.