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California Trust Deed and Foreclosure Investing – Do You Know What's On Record? Part III

February 23rd, 2007 · 4 Comments · Foreclosures, General Contractors & Mechanics' Liens, Trust Deeds

If you are a potential trust deed investor, or an investor looking at a California property in foreclosure, you will often look at the public record or obtain a preliminary title report.

If a borrower is in financial trouble, it will be common to see items like Mechanic's Liens, Abstracts of Judgment, or medical liens, or garbage liens, tax delinquency or child support judgments from the California Department of Child Support Services.  All of these items require close scrutiny but if you see a Lis Pendens, this is a major red flag.

What is a Lis Pendens?  It's Latin for Thing Pending, and the English equivalent is "Notice of Pendency of Action."  Who can file one? Any claimant as defined by California Code of Civil Procedure Section 405.1, "'Claimant' means a party to an action who asserts a real property claim and records a notice of the pendency of the action."

Most often, a Lis Pendens is filed in conjunction with an action to Quiet Title to the property, or with a mechanic's lien foreclosure action.  It is public notice to would-be purchasers or bidders to look into the related pending Court action. 

Be advised that if you bid at a Trustee's Sale or purchase a pre-foreclosure property that if you wish to sell the real estate later, it is not likely to be insurable by a title company until the Lis Pendens and liens have been cleared.

This will require engaging an attorney to expunge the Lis Pendens and/or remove the liens.  The California Code of Civil Procedure Section 405.30 provides the means for an owner to apply to the Court for an expungement of the lis pendens.  Section 405.37 also provides for reasonable attorneys fees to be awarded to the prevailing party.

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4 Comments so far ↓

  • Brian Brady

    Feed readers are great; all the important information pops up.

    This is an excellent resource. Have you joined the California Mortgage Association, Julia?

  • Bill

    In California, do mechanic’s liens automatically have priority over a mortgage?

    I’ve got a landscaping business and am thinking of taking on some work of maintaining a home that is in foreclosure and has been abandoned. But I’m worried about getting paid.

    I’m pretty sure the mortgage on the house is for more than the house is worth. And the mortgage was in place long before I will start doing work.

    If I start the work and don’t get paid and file mechanic’s lien, will my mechanic’s lien have priority over the mortgage, or would my lien get wiped out when the lender completes their foreclosure?

  • va home loan rate

    no the only non mortgage lien to take priority is a tax lien. otherwise you just have to wait until they sell or refinance

  • Julia M. Wei, Real Estate Attorney

    va home loan rate – your statement is inaccurate. Mechanic’s liens can take priority over a mortgage lien if the work was performed before the mortgage (trust deed) was recorded. This is often why construction lenders will request lien releases or subordination agreements. Additionally, a unpaid abstract of judgment may also have equitable subordination rights over a refinance mortgage that for some reason did not pay off the judgment.

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