Lis Pendens: Can a Cash Buyer Tie Up Your House If You Try to Cancel?

What a lis pendens is

Lis pendens is Latin for “suit pending.” It's a notice recorded in the public land records warning anyone looking at the property that a lawsuit involves it.^[1] It isn't a lawsuit by itself. It's tied to one.

States generally allow it only when there's an actual lawsuit asserting a claim to the property. For example, California lets a party to an action asserting a real-property claim record one,^[2] and Texas allows it during an action involving title to or an interest in real property.^[3]

How it happens with cash buyers

1. You sign a purchase contract with an investor. Many investor contracts give the seller no right to cancel.
2. You change your mind, get a better offer, or refuse a last-minute price cut. Unless the contract gives you a right to cancel, backing out can be treated as a breach. What happens next depends on the contract and state law.
3. The buyer sues for specific performance, a court order forcing you to complete the sale, and records a lis pendens. Because every property is considered unique, courts can order a seller to convey the property rather than just pay damages.^[4]

Why it hurts

A lis pendens doesn't legally make a sale impossible, but it clouds your title. Title companies may refuse to insure a sale while the lawsuit is pending, which can halt a sale or refinance in practice.^[1] That leverage is why some buyers use the threat to keep sellers from walking away.

How a lis pendens gets removed

• California: you can ask the court to expunge it. The court must remove it if the lawsuit doesn't actually claim the property, or if the buyer can't show the claim is probably valid. The winning side on that motion is generally awarded attorney fees.^[5]
• Texas: a court must expunge it if the lawsuit lacks a real-property claim, the buyer can't prove probable validity, or the buyer didn't send you a copy of the notice as required.^[3]
• Florida: a buyer's lis pendens generally expires one year after the suit is filed unless a court extends it, and a judge can discharge it the way they would lift an injunction.^[6]
• A wrongful filing can backfire. In California, an improperly recorded lis pendens may support claims like slander of title.^[7]

Protect yourself before you sign

1. Read the cancellation terms. If the contract gives the buyer every way out and you none, ask for a seller cancellation right or a firm deadline.
2. Know your state's rights. Some states give sellers a right to cancel wholesale contracts. Oregon, for example, allows cancellation by the end of the third business day after receiving the disclosure, and at any time if the required disclosure was never given.^[8] See wholesaling laws by state.
3. Watch for recording clauses. A clause letting the buyer record a memorandum of contract is a related way to cloud your title, even without a lawsuit.
4. Have an attorney review investor contracts before you sign, especially if you might want to back out.