Virtual Underwriter

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Underwriting Manual: TX

11.24

Lis Pendens

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Underwriting Manual Subtopic
11.24.1

In General

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 A lis pendens is a recorded legal instrument which serves as constructive notice under Texas Property Code Sections 12.007 and 12.008  that an action or suit affecting a specified piece of real estate has been commenced in a federal or state court and is pending. The term is a Latin term meaning "action pending".

Notice of lis pendens is the common-law doctrine that a pending suit is notice to all the world, so that one who purchases property involved in the litigation takes it subject to and is bound by the judgment rendered therein.

A lis pendens is not a lien, but rather a notice of a possible interest in the property. Recording the lis pendens gives notice to all interested parties, such as prospective purchasers and lenders, and establishes a priority for the later interest in the property which dates back to the date in which the lis pendens was recorded.

In order to provide constructive notice  so that the property cannot be freely sold or encumbered while the action is pending, the notice provided by a lis pendens must set forth (1) the style/ number of the proceeding (2) the court in which the proceeding is pending (3) the parties' names (4) the kind of the proceeding, and (5) a legal description of the property.

Under Texas Law,

  • A purchaser for value is charged with notice of a pending suit.

  • The notice of lis pendens must be filed in the real property records.(Sect. 12.008 Texas Property Code).

Frequently, a lis pendens is filed when only a monetary judgment is sought and title to real property is not an issue.  Although the validity of such a lis pendens is questionable at best, litigation costs in defending agent attacks of title are so prohibitive that Company Policy requires a court order canceling the lis pendens (at least as to the subject property).

Underwriting Manual Subtopic
11.24.2

Expunction of Lis Pendens

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2011 Statutory Provision for Expunction of a Notice of Lis PendensSec. 12.0071.MOTION TO EXPUNGE LIS PENDENS.(a)     A party to an action in connection with which a notice of lis pendens has been filed may:1.       Apply ti the court to expunge the notice; and2.       File evidence, including declarations, with the motion to expunge the notice.(b)     The court may:1.       Permit evidence on the motion to be received in the form of oral testimony; and2.       Make any orders the court considers just to provide for discovery by a party affected by the motion.(c)     The court shall order the notice of lis pendens expunged if the court determines that:1.       The pleading on which the notice is based does not contain a real property claim;2.       The claimant fails to establish by a preponderance of the evidence the probable validity of the real property claim; or3.       The person who filed the notice for record did not serve a copy of the notice on each party entitled to a copy under Section 12.007(d).(d)     After a certified copy of an order expunging a notice of lis pendens has been recorded, the notice of lis pendens and any information derived from the notice:1.       Does not:A.            Constitute constructive or actual notice of any matter contained in the notice or of any matter relating to the proceeding;B.            Create any duty of inquiry in a person with respect to the property described in the notice;C.            Affect the validity of a conveyance to a purchaser for value or of a mortgage to a lender for value; and2.       Is not enforceable against a purchaser or lender described by Subdivision (1)©, regardless of whether the purchaser or lender knew of the lis pendens action.(e)     The court in its discretion may require that the party prevailing in the expunction hearing submit an undertaking to the court in an amount determined by the court. Effective September 1, 2009. Changes/actions required: You may rely on a final court order expunging a lis pendens and remove from or not take exception to it on your commitment or policies.  If no order of expunction is filed in the public record, you must continue to exercise sound business judgment in accordance with Virtual Underwriter Section 11.24.1 and obtain a release of the real property to be insured from the lis pendens.