Lis Pendens are not Necessarily Free
A lis pendens is a recorded document describing real property that provides notice to all the world of a dispute.
A lis pendens is a recorded document describing real property that provides notice to all the world of a dispute. In a purchase and sale contract a buyer will often retain the right to sue for specific performance. In the event a contract turns sour the buyer may file a lawsuit to force the sale of the property. A lis pendens is recorded in order to prevent the seller from transferring the property to a third party and thereby avoiding the jilted buyer’s claim.
Fairness requires that a bond be posted to protect the interests of a seller. The lis pendens places a red-flag in the chain of title and limits the marketability of the property. The practical effects of the lis pendens is that the owner oftentimes cannot sell or mortgage the property. If the proponent of a lis pendens turns out to not have had a valid claim the adverse economic consequences to the seller are obvious.
The Supreme Court of Florida has ruled that in circumstances where a lis pendens is recorded against property that is not related to a recorded interest (i.e., a deed or lien), the trial court has discretion to require a bond to serve as protection against damages arising from an unjustified lis pendens*. Although the court retains discretion a bond is likely wherein the facts are thin. The court will schedule an evidentiary hearing to learn all the potential damages. The type of damages that the bond should protect against include, but are not limited to, the seller’s attorney’s fees, mortgage carry expense, property taxes, insurance, and erosion in sale price.
A buyer seeking to tie up the property with a lis pendens may be asked to put his money where his mouth is.
Simple fairness requires that if you deprive a seller of the right to sell the property you should compensate the seller in the event the buyer ultimately loses the case.
Before the Supreme Court’s announcement some districts in Florida thought it mandatory to post a bond. In other jurisdictions the courts deemed the trial court to have discretion but also required that the seller prove irreparable harm.
The Supreme Court removes any doubt: (1) the court retains discretion to require a bond; and (2) the seller need not show irreparable harm but merely demonstrate damages will likely flow from the cloud on title.
*The Supreme Court case is Medical Facilities Development, Inc. v. Little Arch Creek Properties, Inc., 675 So.2d 915 (Fla. 1996).
ABOUT THE AUTHOR: Houston E. Short
Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.