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What Is A Notice of Lis Pendens In Michigan?

by | Feb 20, 2023 | Property Law |

 

A notice of lis pendens is a legal document recorded in the chain of title to real property at the local register of deeds that gives notice to everyone that said property is the subject matter of a lawsuit.  Specifically, it is designed to warn any potential purchasers, grantees, or anyone else dealing with this real property that it is involved in litigation and that the outcome of the court proceeding can affect any interests acquired in the real property.  These notices are frequently filed in actions where a claimant to a real property interest is trying to quiet title in their name.  Anyone who later purchases or acquires a portion of the real property later would be bound by the result of the lawsuit, so parties cannot defeat the pending litigation they are involved in by just selling their interest away.

A notice of lis pendens has a legitimate purpose in litigation involving real property, but it can also be misused and abused to put a cloud on legal title to the property which adversely affects the owner.  As a result, an improperly recorded notice of lis pendens can subject the filer to significant legal liability.

 

NOTICE OF LIS PENDENS SHOULD ONLY BE FILED FOR LITIGATION THAT AFFECTS AN INTEREST IN LAND

“To render the filing of a complaint constructive notice to a purchaser of any real estate, the plaintiff shall file for record, with the register of deeds of the county in which the lands to be affected by such constructive notice are situated, a notice of the pendency of such action, setting forth the title of the cause, and the general object thereof, together with a description of the lands to be affected thereby.”  MCL 600.2701(1).

Likewise, “[w]here a defendant sets up in his answer a counterclaim, upon which he demands an affirmative judgment affecting the title to, or the possession, use or enjoyment of real property, he may file for record a like notice at the time of filing his answer or at any time afterwards before final judgment. For these purposes, the defendant filing such a notice is regarded as a plaintiff and the plaintiff is regarded as a defendant.”  MCL 600.2711.

The statute is clear that a notice of lis pendens is properly filed and supported in a legal action where the title, possession or an interest in property is affected by the action.  It is not properly filed if the purpose is to essentially secure a pre-emptive “lien” against the property where the legal action is to obtain purely money damages.  For illustrative purposes, Michigan courts have generally upheld the filing of a notice of lis pendens in cases where the underlying claims have included quiet title actions, preserving mortgage interests, and setting aside deeds.   It is generally not proper in cases where the primary goal is to get a money judgment for personal injury, breach of contract, etc.  The critical prerequisite for making specific property subject to the lis pendens rule is that the pending litigation directly involves the property and that the judgment sought must affect the title to the property or the right to possess, use or enjoy it.

In Ruby & Associates, PC v Shore Financial Services, 276 Mich App 110 (2007), the plaintiff filed an action against the defendant alleging fraud, embezzlement and fraudulent transfers.  The plaintiff then filed a notice of lis pendens related to his legal action alleging that the embezzled funds were used to make improvements to the subject real property.  The Michigan Court of Appeals determined that the notice for lis pendens was improperly filed because actions alleging fraudulent transfers purely involving claims for money damages do not come into the purview of the statute.

“In the underlying litigation, plaintiff sought damages of approximately $1 million, arising out of [Defendant]’s alleged embezzlement. Plaintiff claimed that [Defendant] ‘made to her husband’ certain transfers of embezzled funds by ‘paying for a substantial addition to the home’ the couple owned, ‘paying for the construction of an in-ground swimming pool on the property’ and paying for ‘other substantial improvements to the landscaping and residence.’  These allegations simply do not “affect” the title, possession, or an interest in the real property at issue in a manner contemplated by MCL 600.2701. The underlying litigation did not involve any conveyance of the property, a mortgage of it, its transfer, or any interest in it. The claimed “transfer” was of embezzled funds, not the property itself. Plaintiff effectively sought to secure itself as a prejudgment creditor, an action not contemplated under the statute. This was not an appropriate use of the lis pendens mechanism.  It was not a statutorily authorized filing.  Because the notice of lis pendens was improperly filed under MCL 600.2701 it was invalid as a lien on the property and had no effect on subsequently acquired interests.”  Ruby, 276 Mich App at 116-117 (internal citations deleted).

 

DEADLINE TO FILE AND DURATION OF NOTICE OF LIS PENDENS

“[A notice of lis pendens] may be filed with the complaint before the service of the summons; but, in that case, personal or substituted service of the summons must be made upon a defendant, within 60 days after the filing, or else, before the expiration of the same time, publication must be commenced, or service thereof must be made without the state, as prescribed by law.” MCL 600.2701(2).  “If the defendant dies within 60 days after the filing of the notice and before commencement or completion of service of the summons, the summons may be served upon the person substituted for the defendant within 60 days after such substitution.”  Id.

“A [notice of lis pendens]… filed for record shall be effective as notice for a period of 3 years from the date of filing.”  MCL 600.2715(1).  “Before the expiration of the period, the court upon application of the plaintiff and upon such notice as may be directed or approved by the court, and for good cause shown, may from time to time grant additional orders each extending the period of duration of the notice of pendency for a period of not more than 3 years.” Id.

“If a plaintiff filing the notice before the service of the summons fails to serve the same within the time prescribed in [MCL 600.2701(2)], or after the action is settled, discontinued or abated, or final judgment is rendered therein against the party filing the notice, and the time to appeal therefrom has expired, the court, upon the application of any person aggrieved and upon such notice as may be directed or approved by it, shall direct that a notice of the pendency of an action be canceled of record by a particular register of deeds, or by all the registers of deeds, with whom it is filed.”  MCL 600.2725(1).

Likewise, “[i]f a plaintiff filing the notice unreasonably neglects to proceed in the action, or does not commence or prosecute the action in good faith, the court, in its discretion, upon the application of any person aggrieved and upon such notice as may be directed or approved by it, may direct that a notice of the pendency of an action be canceled of record by a particular register of deeds, or by all the registers of deeds, with whom it is filed.”  MCL 600.2725(2).  “The court, in its discretion, upon directing cancellation of the notice upon termination of the action, or during the pendency thereof if satisfied that the plaintiff who filed the notice unreasonably neglected to proceed in the action or did not commence or prosecute the same in good faith, may direct the plaintiff to pay all or any of the costs and expenses occasioned by filing the notice and the cancellation of the record, aside from the costs of the action itself.”  MCL 600.2725(4).

A notice of lis pendens applies to lawsuits filed in both state and federal court.  MCL 600.2735.

It should be noted that, even if a notice of lis pendens appears in the chain of title as a warning, it does not actually prohibit the owner of property from conveying title.  “While a notice of lis pendens may, as a practical matter, inhibit the alienation of the property in that it warns prospective purchasers that they take subject to the judgment rendered in litigation concerning the property, the lis pendens does not prohibit alienation.”  Kauffman v Shefman, 169 Mich App 829, 836; 426 NW2d 819 (1988).  However, the new purchaser buys at his own risk as his property interest may be affected by the future judgment.

 

COURT CAN ORDER BOND TO BE POSTED IN LIEU OF NOTICE OF LIS PENDENS

“In any pending or future action, other than an action to foreclose a mortgage or for the partition of real property or for dower, in which a notice of the pendency thereof has been filed and in which it appears to the court that adequate relief can be secured to the party who filed the same by the giving of a bond, where the cancellation of such notice is not otherwise expressly provided for or regulated, any person having an interest in the property affected by the action may apply for the cancellation thereof upon notice to all the parties to the action and to such other persons as the court may direct.”  MCL 600.2731(1).

“The court in which the action is pending may make an order for the bond upon such terms as to costs or otherwise as may seem just. The discretion vested in the court… may be exercised in any such action, notwithstanding the same may have been brought to recover a judgment affecting the title to, or the possession, use or enjoyment, of specific real property.”  MCL 600.2731(2).  “The bond shall be in an amount which the court, upon consideration of the affidavits submitted upon the application, deems sufficient to indemnify the applicant for the damages he may incur if the notice of pendency is not canceled.”  MCL 600.2731(4). Upon application for cancellation, “whether or not the court determines that adequate relief can be secured to the party filing the notice of pendency by the giving of a bond, the court may order that the notice be canceled, upon the giving of a bond by the applicant upon terms fixed in the order…, unless the person filing the notice of pendency gives a bond, upon terms to be fixed by the order.”  MCL 600.2731(3).

“The order shall provide that upon failure of the person filing the notice of pendency to give a bond in accordance with the order, the notice of pendency shall be canceled upon the giving of a bond by the applicant, as provided therein.”  MCL 600.2731(5).  “Where the person who filed the notice of pendency has given a bond as provided in the order, recovery may be had upon the bond without further leave of the court, upon the discontinuance or abatement of the action, or the cancellation of the notice of pendency because of the neglect of such person to proceed in the action, or upon final judgment against him.”  MCL 600.2731(6). “The recovery may be obtained by a separate civil action, or by motion in the action as to which the notice was filed.” Id.

 

INTENTIONALLY FILING AN IMPROPER NOTICE OF LIS PENDENS CAN LEAD TO CIVIL AND CRIMIMAL PENALTIES

A notice of lis pendens creates a cloud on the title chain for real property, so any person who intentionally and knowingly files an improper notice of lis pendens is in danger of facing civil and criminal penalties

A person aggrieved by a false notice of lis pendens can sue for slander of title.  In this lawsuit, the plaintiff must prove three elements: “falsity, malice, and special damage, i.e., that the defendant maliciously published false statements that disparaged a plaintiff’s right in property, causing special damages.”  B&B Investment Group v Gitler, 229 Mich App 1, 8; 581 NW2d 17 (1998).  Malice means that there was “a desire or intention to injure”.  Glieberman v Fine, 248 Mich 8, 12; 226 NW 669 (1929).

In serious cases, the prosecutor can also file criminal charges for improper filings.  Pursuant to MCL 600.2907a(2), a person who encumbers “property through the recording of a document without lawful cause with the intent to harass or intimidate any person is guilty of a felony punishable by imprisonment for not more than 3 years or a fine of not more than $5,000.00, or both.”

To prevail in both civil and criminal suits, it must be proven that the filer of the improper notice of lis pendens notice acted intentionally, knowingly and maliciously with the intent to harm someone else without lawful cause.  It is not enough if the filer only acted mistakenly or negligently.

 

OUR SKILLED LAWYERS ARE AVAILABLE TO ASSIST YOU

Anyone involved in filing litigation involving real property should determine if a notice of lis pendens is necessary to preserve your rights.  Likewise, if you were just served with a lawsuit and a notice of lis pendens against your own land, then you need to take action quickly to avoid adverse consequences.  In any event, you should seek legal advice right away and consider retaining counsel to advocate for you in court.  Ignoring the problem or going it alone can lead to financial disaster.

If you or a loved one have further questions or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC today.

 

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