Lis Pendens - Effect

Effect

Lis pendens is taken as constructive notice of the pending lawsuit, 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. Careful buyers will be unwilling to purchase land subject to a "lis pendens" or will only purchase the land at a discount, prudent lenders will not lend money on the security of the land and 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 usually 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).

It is important to note that the presence of a lis pendens does not prevent or necessarily invalidate a transfer of the property, although it makes such a transfer subject to the outcome of the litigation. 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") would be deemed to have notice of the litigation and might lose their title to the property if the plaintiff's suit prevails.

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. Frequently, lis pendens statutes only apply to real property, so the common-law doctrine probably still applies to personal property.