In this article, we will discuss notices of lis pendens and wrongful liens in Arizona. Because each piece of real property (real estate) is unique, in the event of a dispute concerning title to real property, Arizona law provides a method by which notice of the dispute may be recorded in order to preserve priority of title. This is called a Notice of Lis Pendens (a notice of pendency of action).
For example, if a buyer is seeking an order to require the seller to transfer title to the property to the buyer (an order for specific performance), the buyer can generally record a Notice of Lis Pendens (a notice of pending lawsuit). Filing and recording the Notice with the County Recorder provides notice to other prospective buyers of the claimant buyer’s prior interest in the property, such that if the claimant wins specific performance he/she will generally be entitled to title to the property even if it has been transferred to someone else after the Notice was recorded. So, a Notice of Lis Pendens essentially prevents a seller from avoiding the impact of an order for specific performance by selling the property to someone else while the claimant buyer’s claims are pending in court.
Notices of Lis Pendens are specifically authorized in A.R.S. § 12-1191(A):
In an action affecting title to real property, the plaintiff at the time of filing the complaint, or thereafter, and the defendant at the time of filing the defendant’s pleading when affirmative relief is claimed in such pleading, or thereafter, may file in the office of the recorder of the county in which the property is situated a notice of the pendency of the action or defense.
Sign Up For Our Newsletter
Contact Us Today
Some courts have recognized “the potential for abuse inherent in the use of lis pendens. The effect of a lis pendens is a cloud on the record title of the affected property for the duration of the lawsuit. It can be improperly used as a lever to force settlement for reasons having no relationship to a party’s claim.” Moseley v. Superior Court, 177 Cal.App.3d 672, 678 (Cal.App.4.Dist.) As a result, there are limits to the situations where a claimant buyer (or other claimants) may record a Notice of Lis Pendens.
First, such a Notice may only be recorded where the claim may affect title to the real property. A claim for monetary damages, for example, does not affect title to real property.
Second, while recording a Notice of Lis Pendens in relation to a lawsuit in which a litigant is seeking specific performance is generally a valid strategic tool for protecting a litigant’s alleged interest in the property while the lawsuit is pending, A.R.S. § 33-420 places other limits on Notices of Lis Pendens. For example, it is improper to record a Notice of Lis Pendens if the claim for specific performance is groundless. A claim is “groundless” “if it has no arguable [legal] basis or is not supported by any credible evidence.” Evergreen West, Inc. v. Boyd, 167 Ariz. 614, 621, 810 P.2d 612, 619 (App. 1991).
A.R.S. § 33-420 provides for severe penalties if a Notice of Lis Pendens is recorded in violation of law, including treble (three times) the owner’s actual damages or statutory damages of $5,000 (whichever is greater) and attorneys’ fees. An owner who believes that a Notice of Lis Pendens has been wrongfully recorded may file an action to immediately cancel the Notice and clear title to the property.
Frequently Asked Questions
When should one consult with an attorney regarding the appropriateness of a lis pendens?
One should always consult with a licensed attorney to determine if a lis pendens is appropriate in a particular matter. Given its potential impact on the marketability of the property and the legal complexities involved, seeking legal advice is crucial to understand the implications and ensure the proper use of a lis pendens.
What is the main point of contention regarding when a lis pendens is appropriate?
The main point of contention regarding when a lis pendens is appropriate centers around whether the underlying lawsuit truly “affects title” to real property, as required by the relevant statute. Generally, claims for quiet title, specific performance or an equitable lien affect the title to the subject real property which would support the recording of a notice of lis pendens.
What is the impact of recording a lis pendens on the marketability of the property?
Recording a lis pendens often has a very detrimental effect on the marketability of the property. Potential buyers may be hesitant to purchase a property with a pending lawsuit, and lenders may be reluctant to provide financing. This can make it more challenging to sell the property or obtain financing for it.
How does a lis pendens affect potential purchasers, lenders, and others?
A lis pendens puts potential purchasers, lenders, and others on notice because it contains a legal description of the property and is recorded with the county recorder. This recording shows up on a title report, alerting interested parties to the pending lawsuit. Anyone who acquires property with a lis pendens recorded takes that property subject to the outcome of the lawsuit.
What is the purpose of a lis pendens?
The purpose of a notice of lis pendens is to give the public notice that a lawsuit is pending that affects title to real property so as to preserve the plaintiff’s right to obtain title if ordered by the Court.
Contact Berk Law Group with Questions About Arizona Lis Pendens
Berk Law Group, P.C. handles disputes over title to real property, including claims involving Notices of Lis Pendens and other wrongful liens. Learn more about real estate dispute and litigation.
If you have any questions about Arizona real estate law, please give us a call at 480.607.7900 or contact our office.
