New Jersey lis pendens
NJ Lis pendens is Latin for "suit pending."[1] NJ Lispendens are suits pending that occur in the state of New Jersey. This can pass on to any awaiting lawsuitor to a precise circumstances with a public notice of litigation that has been recorded in the same location where the title of real property has been recorded. This notice secures a plaintiff's claim on the property so that the sale, mortgage, or encumbrance of the property will not diminish plaintiff's rights to the property, should the plaintiff prevail in its case. In some jurisdictions, when the notice is properly recorded, lis pendens is considered constructive notice to the other litigants or other unrecorded or subordinate lienholders. The term is every so often abbreviated as "lis pend".
In contemporary practice, a NJ lis pendens is a written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claim ownership interest in it. The notice is usually filed in the county land records office. Recording a NJ lis pendens against a piece of property alerts a potential purchaser or lender that the property’s title is in question, which makes the property less attractive to a buyer or lender. After the notice is filed, anyone who nevertheless purchases the land or property described in the notice takes subject to the ultimate decision of the lawsuit.
A foreclosure will wipe out a NJ lis pendens, unless the mortgage or other lien which is being foreclosed was created after the law suit was filed.
History
Under the common law, the mere existence of a lawsuit potentially affecting the title to real property had the legal effect of putting the entire world on constructive notice of the suit;[2] anyone acquiring an interest in real property which was the subject of a pending suit took that interest subject to the litigants’ rights as they might be eventually determined, no matter how much later.[3] In effect, nothing relating to the ownership of the subject matter of the suit could be definitively changed while the suit was pending.[4] Innocent buyers might discover the existence of a lawsuit too late.
The harsh effect of this rule, and especially its effect on innocent purchasers (particularly vis-à-vis not-so-innocent sellers), led many jurisdictions to enact lis pendens statutes requiring a written notice, usually recorded in the land records where the real estate is located, for the notice provisions of the rule to be effective. Typically, a separate recorded instrument is required by statute if the lawsuit in question affects title to real property.[5] If the statutory requirements are met, the world is put on "constructive notice" of the existence of the suit, and any person acquiring an interest later does so subject to the outcome of the suit. Some states’ lis pendens statutes require the filer of the notice, in the event of a challenge to the notice, to establish that it has probable cause or a good likelihood of success on the merits of its case in the underlying lawsuit; other statutes do not have such a requirement.[6].
Effect
NJ Lis pendens is taken as constructive notice of the pending lawsuit in New Jersey,[7] and it serves to place a cloud on the title of the property in question until the suit is resolved and the notice released or the lis pendens is expunged. Reputable, careful lenders will not lend money on the security of land which is subject to a lis pendens, as title insurance companies will not insure the title to such land: title is taken subject to the outcome of the lawsuit. Because so much real property is purchased with borrowed money, this largely keeps the owner from selling the property. It also may keep the owner from borrowing money secured by the property (such as to pay the costs of defending the suit). Similarly, careful buyers will be unwilling to purchase the land, at least not at what the full value would be without the cloud on title.
It is important to note that the presence of a lis pendens does not prevent or necessarily invalidate a transfer of the property in New Jersey,[8] although it makes such a transfer subject to the outcome of the litigation. As such, it tends to scare off diligent, reputable lenders and careful buyers. Thus, the owner is not prevented from selling the land for (non-borrowed) cash, pledging it as security for a speculative loan, or giving it away—subject to the outcome of the lawsuit. However, once the lis pendens is recorded, the recipient (a "purchaser" or "grantee pendente lite")[9] would be deemed to have notice of the litigation, and thus would not be a bona fide purchaser, and the title might be regained.
While it is generally thought of in connection with real property (land, buildings, and the like), the doctrine of lis pendens also applies to personal property.[10] Frequently, lis pendens statutes only apply to real property, so the common-law doctrine probably still applies to personal property.
References
- ^ Black's Law Dictionary, p. 950 (8th ed.), 1999.
- ^ E.g., First Maryland Financial Services Corp. v. District-Realty Title Insurance Corp., 548 A.2d 787, 791 (D.C. 1988); Malcolm v. Superior Court (Green), 29 Cal.3d 518, 523 (1981).
- ^ District of Columbia Redevelopment Land Agency v. Dowdey, 618 A.2d 153, 161 fn. 14 (1992).
- ^ E.g., Lewis v. Jordan Investments, Inc., 725 A.2d 495, 500 (D.C. 1999).
- ^ E.g., Calif. Code of Civil Procedure §§ 405–405.61; D.C. Code § 42-1207 (formerly § 45-906.1), enacted 2000.
- ^ E.g., McAteer v. Lauterbach, 908 A.2d 1168, 1170 (D.C. 2006).
- ^ R.I. Weil & I.A. Brown, Jr., California Practice Guide: Civil Procedure Before Trial ¶ 15:1.
- ^ E.g., 1st Atlantic Guaranty Corp. v. Tillerson, 916 A.2d 153, 157 (D.C. 2007); see also Morrison v. Shuster, 1 Mackey 190, 200, 1881 U.S.App.Lexis 2702 (1881).
- ^ 1st Atl. Guar. Corp. v. Tillerson, 916 A.2d 153, 157, quoting Powell on Real Property § 82A.01 [1] (2006).
- ^ Weightman v. Washington Critic Co., 4 App. D.C. 136 (1894).
Compare with Lis alibi pendens.