Tuesday, May 26, 2020
Property disputes have a tendency to become bitter and entrenched as represented in the 1990’s film The Field which centred on a belief of a tenant of a small plot of land, who had nurtured it from barren rock to a fertile field, that he had acquired a claim to the land when it was subsequently offered for auction.
In this note we look at what a lis pendens is and how to deal with them. A lis pendens (literally translated from its Latin term means “litigation pending”) is a burden registered against property in circumstances where there is ongoing Circuit or High Court proceedings in which a claim is made to an estate or interest in land.
A lis pendens is potentially ‘a blocking mechanism’ which practically can frustrate or delay a sale of property by publishing/putting purchasers on notice of a dispute affecting the property in sale. However, it is open to abuse and while a lis pendens may reflect the fact that there is a genuine dispute it is open to misuse as there is no review at the point where the lis pendens is registered to determine if a genuine dispute exists.
To secure the registration of a lis pendens, proceedings do not need to be served only issued. Without service the party against whom they are issued is unaware of their existence. If a litigant is seeking to rely on a lis pendens, it is advisable that the proceedings are served and notice given of the intention to register the lis pendens.
Two registration steps are necessary before a lis pendens can be registered as a burden affecting registered land:
A burden is registered against title to a property and typically limits or restricts the title of the registered owner in some way. In the normal course when disposing of registered land, the vendor will be required to explain any burdens that are registered against the land. Examples of burdens include rights of way/easements for services across property, a right of residence or maintenance, or a charge (mortgage).
Why register a lis pendens?
A lis pendens is often utilised to prevent an owner of a property from disposing of his interest by putting potential purchasers on notice that there is a dispute affecting the property. In practical terms a lis pendens will make it extremely difficult for a property to be sold or mortgaged until the action has been heard or the lis pendens has been removed/cancelled as a burden.
A lis pendens is also often used as a mechanism by lay litigants to obstruct a receiver or bank from dealing with charged property or exercising a power of sale. If there is a genuine bona fide dispute between parties which affects a property, the registration of the lis pendens is a cost-effective preliminary step of putting third parties on notice that there is a dispute in being. Ultimately any rights claimed in proceedings affecting land would have to be established by an order of a court following a full court hearing and a determination on the facts of a case.
Removing a lis pendens
A lis pendens can only be removed with the consent of the person who registered it, or by obtaining a court order under Section 123 of the 2009 Act. An application to remove a lis pendens can be made under the 2009 Act where:
It is noted above the registration of a lis pendens is an administrative process which can occur without any court intervention or input from a solicitor so long as proceedings have issued. In contrast, the procedure to cancel or remove a lis pendens without the consent of the party who registered it is onerous involving significant costs and delays. The simplified process of registration, can lead to an abuse of process, as it does not require a stateable case before the courts but rather the issue of proceedings.
From a conveyancing perspective, if the sale of a property proceeds where a lis pendens has been registered, the lis pendens will remain as a burden registered against the property until such time as an application to remove it has been made under the 2009 Act (as described above). Even where a lis pendens is removed there is no bar on the party claiming the interest instituting further writs and proceeding to register a further lis pendens and following the steps outlined above.
However if a lender holding the first ranking charge sells a property as mortgagee, then once the transfer by the lender is registered in the Land Registry, it will overreach the lis pendens, which will then be cancelled by the Land Registry. Any subsequent purchaser cannot be bound by the outcome of proceedings where the lis pendens burden is cancelled from the folio. From a purchaser’s perspective they will want to be sure as to the nature of the underlying dispute and that it will not impact their ownership rights into the future – the cancellation of the lis pendens may not mean that ‘the dispute has gone away’.
A similar situation occurs where a lis pendens is registered in the Central Office after a binding unconditional contract for sale is entered into. Section 52 of the 2009 Act provides that the full beneficial interest passes to a purchaser upon making an enforceable contract for land, the purchaser’s interest will gain priority over any lis pendens registered on the folio after the date of the contract. Accordingly, if the lis pendens is registered after the contract for sale is entered into but before the transfer is registered, a purchaser when submitting the transfer for registration can make a simultaneous application for cancellation of the lis pendens using Form 57B of the Land Registration Rules 2012.
It is standard practice to seek ‘clean title’ which is good and marketable on behalf of a purchaser. In normal course, other burdens such as charges or mortgages would be vacated/cancelled post-closing in reliance on undertakings given to discharge same out of sale proceeds.
The existence of a lis pendens will make purchasers nervous. The lis pendens would have to be disclosed to a funder and title would have to be qualified meaning there is a derogation from offering an unqualified ‘good and marketable title’. A purchaser and a funder would have to be fully satisfied that there is no negative impact and that the lis pendens can be removed/cancelled on the title. This may ultimately frustrate the sale or force a vendor to reach a settlement with the holder of the lis pendens who then sign the necessary forms to have it cancelled in the Land Registry.
What the courts say
In the Supreme Court decision of Kelly and O’Kelly v IBRC Limited (1) the defendant sought to have a lis pendens struck out as an abuse of process. IBRC obtained possession of the property and the plaintiff issued summary proceedings against IBRC for trespass. In this case the plaintiff did not serve the summary proceedings on IBRC or give notice to IBRC of the registration of the lis pendens. IBRC alleged that the proceedings were not bona fide but were instituted specifically for the purpose of frustrating the sale. The High Court held that where a party registers a lis pendens there must be a genuine claim to an interest in land. Mr Justice Ryan held that; “The proceedings … insofar as they assert an interest in land such that would justify the registration of a lis pendens, constitute an abuse of process. The fact that the plaintiffs are unable, even when faced with this motion, to suggest any detail or even any basis for advancing a claim as to an interest in land, is very telling and in my view is quite fatal to their claim and confirms the absence of bona fides in doing so… It would be a clear injustice to permit the processes of the Court to be employed for the purpose of frustrating the exercise of legitimate rights.” This decision was upheld by the Supreme Court.
Tola Capital Management LLC v Joseph Linders and Patrick Linders (2) sets out the grounds a party seeking to register a lis pendens must establish;
The High Court held that if the proceedings relating to the lis pendens had not been instituted by the plaintiff in good faith then a court should grant an order to vacate the lis pendens.
In the recent decision of Irish Aviation Authority v Monks (3), the Court of Appeal upheld the High Court’s decision to grant an Isaac Wunder order against the defendant, effectively barring him from instituting court proceedings without leave. The defendant had a long-running dispute with IAA over a plot of ground which he alleged his father had been unduly influenced to sell at an undervalue. IAA for its part required the land to build a new control tower at Dublin Airport. Key to the High Court’s decision to grant the highly unusual order was the fact that Mr Monks had launched several successive sets of proceedings against IAA, in each instance merely as a pretext to lodge a lis pendens in the Central Office of the High Court and so prevent IAA from dealing effectively with the land.
The bar for registering a lis pendens is currently low compared to the steps to remove it. From the outset there is no adjudication on the merits of a lis pendens at registration and this can result in abuse of the remedy. One potential reform would be to require the consideration of the criteria for the registration of a lis pendens under 2009 Act at the time of the application and not when application has to be made to court to vacate the lis pendens. This would act as a deterrent to many spurious applications. While a lis pendens is an effective preliminary step in a genuine dispute affecting property, it is apparent that controls need to be implemented to prevent its misuse by parties not acting in good faith.
(2)  IEHC 316
(3) 2019 IECA 309
Article written with the assistance of Harry O’Malley.