California law requires those who engage in litigation involving real estate to record and file a lis pendens, which is a notice of pending litigation. In a January court case, the Court of Appeal for the Fourth District issued a ruling dealing with the proper procedure for recording a lis pendens, and requiring statutory compliance in order for the lis pendens to be valid.
Lis Pendens (Notice of Pendency)
A lis pendens is a notice that land is subject to a lawsuit. It means that anyone who subsequently takes any interest in the property, whether by purchase, gift, or inheritance, will take subject to the outcome of the litigation. The lis pendens gives information to potential purchasers of the property so that they can take the lawsuit and its uncertainties into account when considering whether to buy property.
When a party records a lis pendens, California law requires that he or she must serve the lis pendens or (notice of the action) on all parties who will be adversely affected and on all record owners of the property. The lis pendens and proof of service must also be filed with the court. If a party joins the lawsuit at a later date, a lis pendens must be served on the new party. If these requirements are not complied with, the lis pendens notice is invalid and the other party can move to expunge the lis pendens.
In the lawsuit, Rey Sanchez Investments v. Superior Court, the defendants, Sallie J. Cribley-Cole and Anna Gonzalez, contracted to sell a parcel of land to PCH Enterprises, Inc. (“PCH”). PCH sued Cribley-Cole and Gonzalez for failing to perform on the contract and recorded a lis pendens when it filed suit but failed to file a proof of service with the court.
Rey Sanchez Investments later intervened in the lawsuit, claiming to be the true owners of the property. Once Rey Sanchez became a party to the lawsuit, it should have been served with the lis pendens, but PCH failed to do so. Rey Sanchez then claimed that the lis pendens was invalid and should be expunged.
PCH argued that the lis pendens should be considered valid because Rey Sanchez had actual notice of the lawsuit and did not timely move for expungement. The trial court agreed with PCH, and Rey Sanchez appealed.
In the appeal, the Court of Appeal noted that in past cases involving lis pendens notice requirements, strict compliance with the statute had not always been considered mandatory. Exceptions had been made for substantial compliance with the statute and when the party disputing the validity of the lis pendens delayed in bringing the matter to the court.
However, in Rey Sanchez Investments, the Court of Appeal required statutory compliance for the lis pendens to be valid. Since PCH had not followed the requirements of the statute, the lis pendens was invalid as to Rey Sanchez’s interests. The court noted that even if only substantial compliance was required, PCH’s actions would fail that standard as well.
If you are considering engaging in litigation involving real estate, it is essential to properly record and file a lis pendens in order to protect your interests and ensure that potential purchasers have notice of the litigation. Please contact an Orange County real estate litigation attorney at Hershorin & Henry, LLP, to schedule a free consultation.