Although it sounds like a person, lis pendens is actually a document filed with a Court and recorded in the Public Records under Florida law. It creates what is called a "cloud" on the title to real property. It is specifically recognized and authorized by Section 48.23 of the Florida Statutes.
There are two types of lis pendens under Florida law; those of right that are founded on duly recorded instruments, and those that are not founded on duly recorded instruments, but may still be maintained in the discretion of a Court.
The first kind, those founded on duly recorded instruments, basically means they are based on recorded liens and other instruments, like mortgages. For example, if a party borrows money from a bank to purchase a home, that transaction is usually documented by both a promissory note, representing the debt and the promise to repay it, and a recorded mortgage, which is a security interest in favor of the lender in the real property. As an aside, in that scenario, the loan is termed a "purchase money mortgage" because the money lent is being used directly for the purchase of the property securing the debt. However, the mortgage securing the debt can cover unrelated or additional property as security for the loan. If the borrower defaults on the loan, the lender has certain legal rights, one of which is to foreclose on the mortgage in an effort to satisfy the debt. When that occurs, the foreclosing lender will file a notice of lis pendens that serves to give notice of the existence of the lawsuit.
The second type are allowed only under limited circumstances and within the discretion of a Judge. The proponent must satisfy the burden of proving a nexus between the lawsuit and the real property. This generally must be done through an evidentiary hearing where the proponent has to prove that it has a claim that affects the title to real property. An example would be where a party loaned money for the purchase of land under a written agreement stating that the lender would be on the title, but the title omitted the lender. While under that scenario there may not be a clear legal right to initially record a lien, but a claim of, for example, a constructive trust by the lender over the property may sufficiently rise to the level of satisfying the lender's burden to allow it to file and maintain the notice. In contrast and where many lis pendens are determined to be improper are in the dissolution of a marriage where one party's separate business owns land and the other attempts to reach that property in the divorce with a lis pendens. Each situation depends on its unique facts, which is why the Judge must receive and weigh evidence to determine whether the party has satisfied its burden.
So what is the ultimate effect of athe notice? It alerts prospective buyers of a claim against real property in a pending lawsuit and protects the claimant from losing its right to the property to a subsequent bona fide purchaser. Contrary to common belief, a lis pendens does not prevent the owner from selling the property. However, in common practice most title companies will not provide insurance, closing agents will not close without the lien being bonded, and buyers will not buy because they can't obtain clear title or become bona fide purchasers, so in that practical sense a lis pendens may be said to bar the transfer of title. Also, it is important to note that a buyer that purchases property subject to a lis pendens will likely inherit the lawsuit, therefore, a prudent step before any purchase is to obtain a comprehensive title search. Lastly, a party can subject itself to liability, including punitive damages, for improperly filing a lis pendens, therefore, is it prudent to seek qualified expert legal counsel before filing a lien or a lis pendens.
This article is not meant to provide legal advice or to form an attorney-client relationship; it is meant only to provide general information about this topic. To view videos and articles about this and other business law related topics, please visit my website at http://www.davidsteinfeld.com/
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