A notice of lis pendens is frequently filed by one or more parties to a lawsuit that may affect the title to or enforceability of a lien on real property. Pennsylvania courts recognize a writ of lis pendens as a means of notifying innocent parties that title to the real estate may be affected by the outcome of the real estate dispute. The filing of a praecipe (notice) of lis pendens does not create a lien on the property, but it can affect the title holder’s ability to sell the property or to borrow money using the property as collateral. A recent decision by the Superior Court of Pennsylvania has defined important limits to the use of lis pendens.

The case arises out of a dispute between GLD Foremost Holdings and the former owner of Foremost Industries, Inc. over the alleged breach of a stock purchase agreement between the holding company and its former owner. The owner filed a complaint in federal court in November 2015 alleging that the holding company failed to pay sums due under the stock purchase agreement. The holding company counter sued for damages alleging that the former owner fraudulently transferred real property that belonged to the company.

In January 2016, the former owner filed to praecipe of lis pendens against three tracts of land owned by Foremost Industries. The notices stated that federal counter suit “concerned” the land. The company sought an emergency writ dismissing the lis pendens. The trial court granted the writs and dismissed both lis pendens. On appeal, the Superior Court reversed the decision. The court found that title to the real estate was not involved in the lawsuit. Regardless of which party prevailed in the claims about the stock purchase agreement, Foremost Industries would remain the legal owner of the land and that a lis pendens was not allowed.

This case provides an example of a party attempting to use the prejudicial effects of a lis pendens to gain advantage in a case that does not involve title to either party’s real property. Anyone facing a similar tactic may wish to consult an attorney who handles questions title to real property for an analysis of the law and facts that may apply to the case.

Source: Findlaw, “In re: Foremost Industries, Inc., J-S80037-16,” Feb. 16, 2017.