Claims against real estate you own restrict your ability to convey clear title to a buyer. Both a lis pendens and a lien against property represent claims against it. Yet, the lis pendens is not the same thing as a lien. Instead, it is a notification of a potential lien.
A lien is a claim a creditor has against property. The lien gives the lien holder the right to foreclose on the property should the borrower default. In a mortgage loan, the mortgage is the lien held by the lender to secure the debt. Some liens are voluntary, such as mortgage liens created by the property owner. Other liens are involuntary, created by statue, such as property tax liens.
The existence of a lien against real estate does not prevent the owner from conveying title to another party. The lien can reduce the value of the property if it stays attached after conveying to the new owner. When a lien “runs with the land” it stays attached to the land, even when the property changes owners, until the debt is paid.
A lis pendens is a written document that gives legal notice of a court action involving a possible judgment against a piece of real estate. Since there is a delay between filing a lawsuit and the final judgment, the lis pendens protects the potential claims of the party bringing suit against a landowner. By filing and documenting the lis pendens in a state or federal court, it gives notice to potential buyers of a possible lien.
Filing the lis pendens does not guarantee there will be a lien placed on the property. It is possible that the landowner wins the court case and escapes without any claims placed against his land. Yet, if the court action results in a lien attached to the land, the court backdates the lien to reflect the recorded date of the lis pendens. There is a priority of liens, whereas the liens with highest priority receive payment first. Some liens, such as property tax liens, take priority over most other type of liens. With liens such as mechanic liens and judgment liens, the lien filed first receives payment first. If a property sells in foreclosure to pay off creditor, it is possible there won’t be enough money to pay off all the creditors. In this case, liens with the highest priority receive payment first.