What is a Lis Pendens Surety Bond?

A Lis Pendens Surety Bond is a type of judicial court bond where a Plaintiff seeks to prevent the sale or loan of property by the Defendant. This surety bond ensures that the plaintiff is filing the Lis Pendens in good faith and not under false claims.

By filing a Lis Pendens Bond, an individual or entity can protect its claim to the title pending the lawsuit’s outcome. Lis Pendens can only be filed when a claim is specifically related to the property.

 

What is a Lis Pendens?

A Lis Pendens is an official, constructive notice (or warning) to the public, especially prospective homebuyers and lenders, that the ownership of a property is involved in a legal dispute where there is pending litigation.

Lis Pendens means “pending lawsuit” in Latin.  A plaintiff files it, but it can also be filed by a defendant that is making a counterclaim. Lis Pendens can adversely affect the possibility of a sale, home loan or negotiation of a sale price.

This condition is lifted only once the litigation process has been settled. Since pending lawsuits can take several months to years, homebuyers and lenders are often warned to stay away from these properties.

 

When do you need to use a Lis Pendens?

Lis Pendens is often used in divorce cases where allotment of real estate properties is in dispute.

It is a typical case where one spouse lists the property in his or her name, but the other spouse seeks a portion of ownership. The other party will block the spouse (with the name on the title) in selling the property because it is under pending litigation.

Lis Pendens is also filed in cases of contract disputes. This condition covers when a homebuyer believes he or she has been unfairly omitted from the purchase of the property.

For example:

Buyer A and Seller enter a contract for the sale of the property. However, the Seller wishes to sell the home to Buyer B. Buyer A can sue the Seller and file a Lis Pendens to block the sale of the house.

Let’s say that Buyer B proceeds to buy the house. However, the court determines Buyer A to be entitled to enforce the sale. Buyer B will lose the home to Buyer A, and the Seller must reimburse payment to Buyer B.

Creditors and lenders also file Lis Pendens cases wherein they file default notices on a delinquent debtor, but the debtor wishes to sell the property. Banks often use this procedure to provide notices to homebuyers that a property is in foreclosure.

For example:

If a creditor sues an owner of a certain property and a buyer purchases the said property, the new owner will face the lawsuit. The sale of the property does not block the plaintiff from seeking reparation through litigation.

 

Are there different types of Lis Pendens Surety Bonds?

Technically, a Lis Pendens Bond is used by plaintiffs to block a defendant's sale of a property, and in doing so, it guarantees that the plaintiff is not filing claims in bad faith.

However, defendants have the option of recourse if they decide to sell their properties but cannot due to the plaintiff blocking their rights to sell. This is where a Release of Lis Pendens Bond comes in.

A Release of Lis Pendens Surety Bond is the defendant's guarantee that he or she will conform to the court ruling. This bond makes it possible for defendants to sell the property by ensuring that the plaintiff will be satisfied should the original Lis Pendens be justified.

 

How much does a Lis Pendens Bond cost?

The bond amount varies by state and will be determined by state statutes. But the amount typically covers the provision for court costs and any other interests and fees that may apply.

 

How long does a Lis Pendens Bond stay valid?

Depending on both parties, this could tie up property for years which could be devastating for the defendant.

Courts may be willing to strike the Lis Pendens Bond when:

  • a party (let's say the plaintiff) fails to pursue the underlying suit in earnest
  • if the lawsuit only seeks reparation that does not directly relate to the property
  • if a party files an unauthorized lis pendens, upon request by the property owner

 

How do I obtain a Lis Pendens Surety Bond?

First, you need to seek a certified surety professional who handles this type of surety bond.

Requirements you need to submit include, but not limited to:

  • a completed application form
  • court order of filing a Lis Pendens Bond
  • financial statements that cover your income, irrevocable lines of credit, bank documents, etc.

The surety underwriter will review your completed application and other supplementary documents.

To request additional information about your type of bonding need, you can also apply for a free quote.

Need more information about Lis Pendens Surety Bonds? Call our surety experts today!

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Lis Pendens Bond Infographic
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