What is a Lis Pendens (Notice of Pendency of Action) under California Law?
Formerly known as a “lis pendens,” a notice of pendency of action is a written document, recorded with the county recorder, that provides constructive notice of a pending court action (i.e. a lawsuit) that affects title to, or possession of, real property.
The trick to a lis pendens is found in California Code of Civil Procedure (CCP) § 405.24, which provides that: “From the time of recording the notice of pendency of action, a purchaser, encumbrancer, or other transferee of the real property described in the notice shall be deemed to have constructive notice of the pendency of the noticed action as it relates to the real property and only of its pendency against parties not fictitiously named. The rights and interest of the claimant in the property, as ultimately determined in the pending noticed action, shall relate back to the date of the recording of the notice.”
What this means is that the judgment in the pending lawsuit will be deemed as though it occurred on the date that the lis pendens was recorded. For example, if you hire a real estate lawyer who persuades the court in a quiet title action that the record owner has no interest in the property, any later-recorded judgments against the owner of record will not attach to the property.
This is because California Civil Code § 1214 codifies California’s race-notice recording statutes, providing that: “Every conveyance of real property . . . is void as against any subsequent purchaser or mortgagee of the same property, or any part thereof, in good faith and for a valuable consideration, whose conveyance is first duly recorded, and as against any judgment affecting the title, unless the conveyance shall have been duly recorded prior to the record of notice of action.”
As the Ninth Circuit Bankruptcy Appellate Panel explained in the unpublished, but well-written, decision in Giovanazzi v. Schuette (In re Lebbos), 2012 WL 6737841, 2012 Bankr. LEXIS 5962, *46-49 (B.A.P. 9th Cir. Dec. 31, 2012), aff’d, 600 F. App’x 521 (9th Cir. 2015):
The purpose of a lis pendens is to give constructive notice to potential purchasers and encumbrancers of pending litigation so that the judgment in the action will be binding on subsequent parties, even if they acquire their interest before judgment is actually rendered. CCP § 405.24; Arrow Sand & Gravel, Inc. v. Superior Court, 38 Cal. 3d 884 (Cal. 1985). A recorded lis pendens effectively clouds the title to the property described in the notice and, as a practical matter, it impedes or prevents a sale or encumbrance of the property until the litigation is resolved or the lis pendens is expunged. 5 Cal. Real Est. § 11:151 (Harry D. Miller & Marvin B. Starr, eds., 3d ed. 2009). “A judgment in the pending action that determines the rights in the property favorable to the claimant relates back to and receives its priority from the date the lis pendens is recorded, and is senior and prior to any interests in the property acquired after that date to preclude a subsequent purchaser from acquiring a superior interest.” Id. (citing Cal. Civ. Code § 1214 and CCP § 405.24). “The judgment has priority even if the subsequent interest or lien is recorded after the lis pendens but before the judgment.” Id. [internal citations omitted]. The judgment is binding on any person who acquired an interest in the property subject to the lis pendens. 5 CAL. REAL EST. § 11:149 (citing CCP § 1908(a)(2)). See Slintak v. Buckeye Ret. Co., 139 Cal.App. 4th 575 (Cal. Ct. App. 2006) (lis pendens provides constructive notice of property litigation such that any judgment later obtained in the action relates back to the filing of the lis pendens and clouds title until the litigation is resolved or the lis pendens is expunged; any party acquiring an interest in the property after the action is filed is bound by the judgment).
Or, suppose a divorce attorney in California files a lis pendens after a dissolution petition is filed. If the court ultimately determines in the property division that the other spouse holds no interest in the property based on offsets, any transfers that the other spouse has recorded after the lis pendens should have no legal effect. Even further, the lis pendens may be helpful if the other spouse uses a bankruptcy attorney to assert their rights under Chapter 7 of the bankruptcy code.
As the Ninth Circuit explained, “[r]ecordation of a lis pendens binds all subsequent parties who acquire an interest in the property by the judgment thereafter rendered in the action.” In re Lane, 980 F.2d 601, 603 (9th Cir. 1992). The Lane court also found that “the filing of a valid lis pendens is a transfer within the meaning of the Bankruptcy Code” that may be avoided by way of a preference action. Id. at 606.
So long as the former spouse is outside the preference period (for insiders, one year before the bankruptcy petition), the lis pendens is notice to any buyer that the seller, such as a Chapter 7 trustee, may not hold title to the properties. See Dyer v. Martinez (2007) 147 Cal. App.4th 1240. This is one of the many overlays that allows an experienced divorce and bankruptcy attorney to provide a better result.
Contact an Experienced Lis Pendens Attorney in California
Because a lis pendens is such a powerful tool to resolve legal disputes regarding title to or possession of real property, California law requires that you either have an attorney file the lis pendens or apply to a court. Indeed, the ramifications of filing an erroneous lis pendens can be serious. If you have questions about lis pendens law, contact a skilled real estate litigation attorney in California.