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.