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In cases involving real property, a plaintiff often will file what is called a “lis pendens,” which is Latin for suit pending. The purpose of filing a lis pendens is to secure a plaintiff’s claim on a property so that a sale, mortgage, or encumbrance of the property will not diminish the plaintiff’s rights to the property, should the plaintiff prevail in its case.
The practical effect of filing a lis pendens is to alert a potential purchaser of the property in dispute that the property’s title is in question, which obviously makes the property a whole lot less attractive to any potential buyer. In other words, once the lis pendens is recorded, it serves to place a cloud on the title to the property in question until the lawsuit is resolved and the notice is released or expunged. More importantly, the lis pendens has the effect of preventing most lenders and title companies from lending money on the security of land that is subject to a lis pendens.
Arizona’s lis pendens statute is found in Arizona Revised Statutes Section 12-1191(A), which states in part that in “an action affecting title to real property, the plaintiff at the time of filing the complaint, or thereafter, . . . may file in the office of the recorder of the county in which the property is situated a notice of the pendency of the action or defense.” A recent decision from the Arizona Court of Appeals in Sante Fe Ridge Homeowners’ Association v. Carla Bartschi discussed under what circumstances does an action affect title to real property.
In Sante Fe, the Sante Fe Homeowners’ Association filed a complaint against Carla Bartschi alleging breache of contract and sought injunctive relief for Bartschi’s alleged violations of the Association’s CC&R’s. Sante Fe alleged that Bartschi had failed to maintain the landscaping on her property. In conjunction with its lawsuit, Sante Fe filed a lis pendens against Bartschi’s property. Bartschi answered Sante Fe’s complaint and filed a counter claim for wrongful recordation of the lis pendens, and sought statutory damages , attorney’s fees, and costs under Arizona Revised Statutes Section 33-420(A). The trial court eventually granted Bartschi’s request for statutory damages, ruling that Sante Fe’s action did not affect title to real property and the lis pendens was prematurely recorded.
On appeal, the Arizona Court of Appeals ruled that Sante Fe’s action did not affect rights incident to title to real property. The court reasoned that a “lawsuit affects a right incident to title if any judgment would expand, restrict, or burden a property onwer’s rights as bestowed by virtue of that title.” The Court ruled that Sante Fe’s recordation of the lis pendens was premature because at the time it recorded the lis pendens no basis existed to conclude that a lien would be imposed on real property. If Sante Fe had obtained a lien against Bartschi, a basis may have existed to conclude that Sante Fe’s action affected title to real property.
As a practitioner, it is nice to have additional guidance from the courts on issues like these, but it is troubling to think how much Sante Fe was willing to pay to appeal the decision. I have to wonder if the Association members were aware of Sante Fe’s decision to appeal the trial court’s ruling, and whether they would have allowed the Board to authorize the appeal if they knew how much money the Association stood to lose if Sante Fe lost on appeal, which in large part they did.
(Arizona real estate land Fleishman property tax lien foreclosure)
