![]() ![]() However, Third-Party may nevertheless assume the risk of the “cloud” on title and close on the purchase despite the Notice. ![]() In most situations, Third-Party would not proceed with the sale upon learning of the pending action, especially if a title company would not issue a title policy insuring clear title, thus inhibiting the sale. Nearly a year after the complaint is filed, Owner seeks to take advantage of the increase in value and negotiates an all cash ‘As Is’ sale with a third party (“Third Party”). During the time since the breach, the Property value appreciated considerably due to redevelopment in the area. Purchaser pursues the sale, but after months of unsuccessful negotiations, Purchaser files a lawsuit against Owner for damages for breach of contract and for specific performance of contract (i.e., to compel the agreed upon sale to Purchaser), and records a Notice of Pendency of Action. Owner delays and although they eventually enter escrow, Owner fails to close on the sale and deliver title to the Property to the Purchaser. However, recording a Notice of Pendency of Action does not legally prevent transfer of the identified real property, nor does it make transfer despite the Notice, void.Ĭonsider a hypothetical situation where during an economic downturn, a struggling auto dealership owner (“Owner”) enters a contract to sell vacant dealership property (“Property”) to purchaser (“Purchaser”). Thus, the Notice can effectively deter subsequent transfer or encumbrance of the identified real property, since it indicates that property ownership rights are in dispute, and the rights of the party who recorded the Notice will have priority, if successful in their claims. California Civil Procedure Code (CCP) §405.01 et seq. ![]() ![]() Once recorded against the property, making the Notice apparent to those who review property title records, the Notice also gives priority to any judgment obtained by the party who recorded the Notice as of the date the Notice is recorded, over subsequent interests obtained which affect the real property. The significance of a Notice of Pendency of Action is that, by giving notice of a pending legal action involving claims affecting real property identified in the Notice, it protects the interests of the named parties. Giving notice of a pending legal action can be essential to effectively safeguarding real property during litigation, despite the awkward language. Modernly, the terms ‘notice of pendency of action’ or even ‘notice of pending action’ while still clumsy, are more readily recognized. Latin for ‘suit pending’, use of the term lis pendens is a holdover from legal concepts first conceived in ancient Rome. It simply gives notice to the world of a pending legal action involving real property. It does not prevent the sale or transfer of title to real property, does not make such transfers void or even technically encumber real property. A lis pendens is a powerful legal tool, which unfortunately is often misunderstood by professionals and lay persons alike. ![]()
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