REAL PROPERTY CLAIMANTS ARE NOT PROTECTED WHEN A LIS PENDENS IS RECORDED
When a seller reneges on a contract to sell real estate, the aggrieved buyer can tie-up the property in court until the dispute is resolved. In fact, whenever there is a lawsuit involving title or the right to possession of real property, the plaintiff may record a “Notice of Pendency of Action” with the County Recorder. This notice, which is usually referred to as a lis pendens, gives constructive notice to the world of the pending legal action. Anyone who takes a legal interest in the property is deemed to have notice of the pendency of the action and is subject to the judgment of the Court. The lis pendens severely affects the owner’s ability to sell or encumber the property. Since every piece of real property is unique, the lis pendens is essential to protect the rights of persons who have been, or might be, deprived of title or possession of the real property.
If someone has a real property claim, it is important to file a law suit and record a lis pendens as soon as possible to prevent the defendant from selling, or otherwise encumbering, the property before the case is resolved in court. Many lawyers and their clients think that as soon as the lis pendens is recorded, the real property claimant is protected. California Code of Civil Procedure § 405.24 provides:
“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….”
Reading this section alone is misleading and can give a real property claimant false confidence. Once a document is deposited with the county recorder, it must be indexed so that others can locate it in a proper search of the records. Real property purchasers and mortgagers can “be charged only with notice of those documents which are located by search of the proper indexes.” Hochstein v. Romero, 219 Cal. App. 3d 447, 452 (1990). In the recent case of Dyer v. Martinez, 147 Cal. App. 4th 1240 (2007) the California Court of Appeal found that “a lis pendens does not import constructive notice until it has been indexed.” In that case, Kristina Dyer claimed to have a contract to purchase a house from Mr. & Mrs. Rojas. When the Rojas’ refused to close the sale, Ms. Dyer filed suit and recorded a lis pendens on September 9th. However, the county recorder did not index the lis pendens until September 14th. On September 9th, the Rojas’ deeded the house to the Martinezes who had no knowledge of the pending lawsuit. Further, the Martinezes financed their purchase of the property with a mortgage which was also recorded on September 10th.
The Court found that the lis pendens did not affect the Martinezes’ title or the liens of the mortgages, even though it was recorded first. “Because the lis pendens could not have been located through diligent search…the purchaser’s had no constructive notice of the pending action at the time they closed escrow.”
In Los Angeles County, as in many other counties, documents are not indexed for at least five business days after they are recorded. The five day rule is only applicable to documents that are “walked-in.” If the document is mailed to the recorder, it is not indexed for nine weeks. If a real property claimant waits to file suit until just before a defendant sells or encumbers real property, the recording of the lis pendens may not be effective to protect the property. To be certain that the real property claimant’s rights are protected, a plaintiff should file suit promptly and attempt to give actual notice to any potential adverse interest. This might entail faxing, and/or personal delivery of the lis pendens to any known potential buyers and pending escrow. Keep in mind that the county recorder is considered the agent of the person recording the lis pendens. Therefore, the responsibility for properly recording and indexing, falls upon the person recording the lis pendens.
