Using a Lis Pendens to Enforce a Real Estate Contract

A threat of filing a Lis Pendens or Notice of Pendency of a Lawsuit on a property has been used by buyers who try to prevent a seller from getting out of a contract or to try to enforce a contract that expired. We’ve seen buyers use the threat of a lis pendens to try to get more time to close on a contract or to get adjustments in price.

The seller is faced with an alternative – either accept our terms or have your property tied up for years in litigation.

A thing that the seller should keep in mind is that the buyer may be bluffing. Just as the seller does not want to keep the house tied up in litigation, the buyer does not want to keep their deposit tied up in escrow. The buyer also does not want to spend money on legal fees, unless they plan to fight a lawsuit themselves or have their lawyer cousin do it for free.

Another possibility is that the buyer can file the lawsuit and a lis pendens to try to get quick results, but has no real intention to tie up their deposit for years and pay a lawyer every month. On the other hand, the buyer may be serious, especially if the contract is giving them such a good price that it is worth it for them to spend time in court litigating it.

The most common way for contracts to go is to either result in the closing or be canceled and the deposit is returned to the buyer. Very few make it to the stage where the contract is not closed but the buyer still wants it to be open. Usually, a buyer just looks for a different property. But if a situation happens where a buyer is considering an option for tying up property in contract with a lis pendens, all factors must be considered.

It’s usually best to negotiate and give the buyer some time (let’s say 30 days). Perhaps even lower the price a little bit. But in exchange for an agreement not to file a lawsuit on the contract and Lis Pendens on the property. Other options may be considered on a case by case basis.

If you don’t qualify for a mortgage or you are no longer interested in buying the property and you just want your deposit back, then you can sue the seller for the deposit but you probably cannot place a lis pendens on the property because the lawsuit is not about the property, it’s only about the deposit.

Albert Goodwin, Esq. is an attorney with experience in closing disputes. He can be reached at 212-233-1233.