Many of us have heard stories about a friend, family member, or acquaintance, who, while attempting to sell real property, learned that a Lis Pendens was recorded against their real property—clouding title and preventing a sale from occurring. While a Lis Pendens is intended to provide notice that there is a pending legal action affecting title to real property, it is a commonly misunderstood and misused vehicle to “tie up real property” to gain perceived leverage over the homeowner. One should exercise caution before recording a Lis Pendens, as it is incredibly distressing to learn during escrow that a sale of one’s property cannot proceed forward, and if the Lis Pendens does not comply with Arizona law, the wrongdoer can get stuck being liable for fairly stiff penalties.
So, what is the basic law governing the recordation of a Notice of Lis Pendens in Arizona? In order to have a proper legal basis to record a Lis Pendens, there must be a complaint filed with the court consisting of an action affecting title to real property. The Notice of Lis Pendens shall contain the name of the parties, the object of the action or affirmative defense, the relief demanded and a description of the property affected. It is improper to record a Notice of Lis Pendens if (a) no complaint has been filed with the court, or (b) if the complaint filed is not an action affecting title to real property.
But what is an action affecting title to real property? These actions generally involve issues where title or ownership of real property is at issue. For example, an action to seek specific performance in a breach of contract action by a buyer against a seller of real estate, would constitute an action affecting title to real property.
What can you do if you believe a Notice of Lis Pendens has been improperly recorded? Under Arizona, stiff penalties exist if a person causes a document to be recorded which creates a lien against real property if the person knows or has reason to know that the document is forged, groundless, contains a material misstatement or false claim. Arizona law permits the aggrieved person to file a lawsuit to remove the Lis Pendens and/or recoup actual damages and attorneys’ fees caused by the wrongful recording. Further, in an action to remove an allegedly wrongful Lis Pendens, the court’s focus is limited to whether the action is one affecting title to real property.
Although courts employ a liberal standard for determining the propriety of a Lis Pendens—the court must only find some basis for concluding that the action affects title to real property—the short-term benefits realized from recording a wrongful Lis Pendens can backfire quite significantly, and leave the wrongdoer owing a significant amount of damages and attorneys’ fees to the aggrieved homeowner in the long-run.
If you have any questions, you can contact Ben at 602-533-2840 or email him at firstname.lastname@example.org.