The Do’s and Don’ts of Lis Pendens in Florida
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A lis pendens is a common tool used in Florida to put third parties on notice of a pending lawsuit against real estate. If filed properly, a lis pendens protects the plaintiff in a lawsuit from any intervening liens on the property filed after the lis pendens. However, property owners may not be able to sell, obtain financing, or obtain title insurance until the lis pendens is removed. Whether a party is filing a lis pendens, or a lis pendens is filed against their property, it is important to know the do’s and don’ts of lis pendens in Florida.
What is a Lis Pendens and Why is it Important?
The term “lis pendens” translates to “pending lawsuit,” but is defined by Florida courts as “the jurisdiction, power, or control which courts acquire over property involved in a pending suit.” Med. Facilities Dev., Inc. v. Little Arch Creep Props., Inc., 675 So. 2d 915, 917 (Fla. 1996). A lis pendens is important because it provides notice to third parties that a lawsuit has been filed concerning title to or some interest in the property. A lis pendens also protects a plaintiff from intervening liens that may impair or extinguish his or her claimed property rights. Chiusolo v. Kennedy, 614 So. 2d 491, 492 (Fla. 1993) (“The notice is . . . a cloud on the title that creates a priority for the party that filed the lis pendens if that party prevails in the pending litigation.).
For a pending lawsuit against real property to operate as a lis pendens, a notice of lis pendens must be recorded in the official records in the county where the property is located. Fla. Stat. § 48.23(1)(a). The notice must include: the parties’ names; the date of the institution of the lawsuit, the date of the clerk’s electronic receipt or the case number of the lawsuit; the name of the court in which the lawsuit is pending; a description of the property; and a statement of the relief sought. Fla. Stat. § 48.23(1)(c)(1).
What Effect Does a Lis Pendens Have on Property?
Under Florida law, a lis pendens functions as “a harsh and oppressive remedy” that “operates as a cloud on the title and prevents an owner from selling or dealing with it.” Suarez v. KMD Constr., Ins., 965 So. 2d 184, 187-88 (Fla. 5th DCA 2007). Therefore, if a lis pendens is filed on the property, prospective buyers may be deterred from purchasing the property, mortgage lenders may be deterred from providing financing, or title insurance companies may not provide title insurance. Therefore, a lis pendens must have a proper basis, and there are risks to a party that files a lis pendens against property without a proper basis.
When Can a Lis Pendens be Properly Filed Against Property in Florida Litigation?
In Florida, a lis pendens is commonly filed when a party is foreclosing on a mortgage, foreclosing on a construction lien, quieting title, seeking specific performance, or any action involving title to or interest in property. To properly file a lis pendens in connection with such litigation, the plaintiff must show in its pending pleading that the lawsuit is “founded on a duly recorded instrument,” which is a document such as a deed or mortgage recorded in the public records where the property is located. Fla. Stat. § 48.23(3). If the lis pendens is founded on a duly recorded instrument, the filing party has the absolute right to record a lis pendens and no lis pendens bond will be required. However, if the pending lawsuit is not founded on a duly recorded instrument, the plaintiff must show that there is fair connection, or fair nexus, between the apparent legal or equitable ownership of the property and the dispute at issue in the lawsuit. Conseco Servs., LLC v. Cuneo, 904 So. 2d 438, 439 (Fla. 2d DCA 2005) (“A court must dissolve a lis pendens that is based on an unrecorded document unless the proponent establish[es] a fair nexus between the apparent legal or equitable ownership of the property and the dispute embodied in the lawsuit.”).
When Can a Lis Pendens be Challenged and How?
A lis pendens can be challenged if it is not “founded on a duly recorded instrument.” When a pending pleading does not show that an action is “founded on a duly recorded instrument,” a court may control and discharge the recorded notice of lis pendens. Fla. Stat. § 48.23(3). Florida case law makes “clear that the statutory language ‘founded on a duly recorded instrument’ imposes the strict requirement that the lawsuit must be based on the terms contained in the recorded document itself.” Suarez, 965 So. 2d at 187. A lis pendens will not be determined to be “founded on a duly recorded instrument,” for example, if the lawsuit was founded on fraud, or based on a non-recorded document. Daugherty v. Daugherty, 509 So. 2d 1289, 1290 (Fla. 1st DCA 1987). Therefore, if the lawsuit is not based on a duly recorded instrument, then the court has the discretionary power to control and discharge the lis pendens.
However, a court should not dissolve a lis pendens that is based on an unrecorded document if the plaintiff can “establish a fair nexus between the apparent legal or equitable ownership of the property and the dispute embodied in the lawsuit.” Chiusolo, 614 So. 2d at 492. The plaintiff must establish a “good faith, viable claim.” Nu-Vision, LLC v. Corporate Convenience, Inc., 965 So. 2d 232, 234 (Fla. 5th DCA 2007). If the plaintiff “can be afforded complete relief on a claim without reference to the title to the real property, a lis pendens cannot be maintained.” Blue Star Palms, LLC v. LED Trust, LLC, 128 So. 3d 36, 38 (Fla. 3d DCA 2012). However, if a plaintiff can establish a good faith, viable claim that would affect title to the property, the lis pendens should not be discharged.
When is a Lis Pendens Bond Required?
Even if a plaintiff can establish that a lis pendens that is not based on duly recorded instrument should not be discharged, the court may, in its discretion, require the plaintiff in the pending lawsuit to post a lis pendens bond with the court. A lis pendens bond, which may in the form of cash or a surety bond, is designed to protect the property owner from damages that may result from the lis pendens, if the lis pendens is later found to be unjustified. DeGuzman v. Balsini, 930 So. 2d 752, 754 (Fla. 5th DCA 2006) (“If the lis pendens is not based on a duly recorded instrument affecting the title to the property, the court, in its discretion, may require that the party filing the lis pendens post a bond when the property owner shows that damages will likely result in the event the notice of lis pendens is unjustified.”).
In other words, the purpose of such a bond is “as a vehicle for protecting the property holders just as the lis pendens protects the plaintiff and third parties.” S & T Builders v. Globe Properties, Inc., 944 So. 2d 302, 304 (Fla. 2006) (holding that Section 48.23 of the Florida Statutes authorizes a trial court to require the posting of a bond in order to maintain a lis pendens). The damages a property owner can recover for an improperly filed lis pendens are generally measured the “difference between the fair market value at the time of the filing of the lis pendens and the fair market value at [the] time of its termination, plus any consequential damages, including attorney’s fees.” FCD Dev., LLC v. S. Fla. Sports Comm., Inc., 37 So. 3d 905, 909 (Fla. 4th DCA 2010). Depending on the nature of the dispute, the amount of the lis pendens bond required could be substantial, and easily reach in the hundreds of thousands of dollars.
The requirement of posting a bond is entirely within the discretion of the trial court. The trial court is required to conduct an evidentiary hearing to allow the property owner to provide proof as to his or her prospective loss or damage resulting from the lis pendens. Bankers Lending Services, Inc. v. Regents Park Invs., Inc., 225 So. 3d 884, 885-86 (Fla. 3d DCA 2017). Property owners should request the court to consider and include attorney’s fees in the bond amount. Id. (“Attorney’s fees may be considered by a trial court in setting the amount of a lis pendens bond if the court concludes that a bond is appropriate.”). If a bond is required by the court, and the lis pendens is later determined to be improper, then the bond will be used to pay the property owner’s damages.
In Florida, a lis pendens is a common tool used in many lawsuits involving title or interest in property. However, lis pendens are not always properly filed. Before filing a lis pendens, plaintiffs should obtain legal advice. In addition, if a property owner receives notice that a lis pendens has been filed against their property, an attorney may be able to help remove the lis pendens and recover damages.