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.

What CPLR Article 65 Actually Allows

A notice of pendency in New York is governed by CPLR Article 65 (Sections 6501–6516). It may be filed in any action in which the judgment demanded would affect the title to, or the possession, use, or enjoyment of, real property. A buyer suing for specific performance of a real estate contract is the textbook case. The notice is filed in the office of the county clerk where the property is located, indexed against the property, and from that moment forward any prospective buyer or lender takes the property subject to the outcome of the lawsuit. The notice expires automatically three years after filing, but it can be extended for additional three-year periods by court order.

Why the Notice Is Such a Powerful Tool

A notice of pendency does not adjudicate anything. It does not establish that the buyer is entitled to specific performance. But it does, as a practical matter, lock up the property. No title insurance company will issue a clean policy while the notice is on record. No prudent buyer will close on a property burdened by litigation. No lender will lend against a property with an unresolved cloud on title. The seller who hopes to sell to someone else, refinance to extract equity, or transfer the property to a family member is effectively prevented from doing so until the case is resolved.

That practical leverage gives the buyer who files a notice of pendency a settlement asset far more valuable than the bare merits of the underlying claim. A seller facing a notice of pendency on a property they need to sell may accept a settlement they would not otherwise consider, including additional time to close, a price adjustment, or the return of an additional deposit.

When the Buyer Can Actually File

The buyer's right to file is not automatic. The lawsuit must be a real action affecting title to real property, not a dressed-up money damages case. Filing a notice of pendency in a lawsuit that does not satisfy CPLR 6501 is improper and can be cancelled under CPLR 6514. The court can award costs, expenses, and attorney fees against the party who filed an improper notice. In egregious cases, sanctions and a separate cause of action for slander of title may follow.

The buyer must also have a viable specific performance claim. Specific performance is an equitable remedy available where the legal remedy of money damages is inadequate, which is generally the rule for real estate because every parcel is unique. The buyer must be ready, willing, and able to perform — meaning they must be able to come up with the purchase price, deliver the deposit, and close on the contract terms.

Cancellation Under CPLR 6514

CPLR 6514 sets out two mechanisms for cancellation. Under CPLR 6514(a), cancellation is mandatory in three situations: when service of the summons has not been completed within the time limited, when the action has been settled or discontinued, or when a final judgment has been entered against the party who filed. Under CPLR 6514(b), cancellation is discretionary where the action was not commenced or prosecuted in good faith.

Many notice of pendency cases turn on the discretionary standard of CPLR 6514(b). A motion to cancel the notice — filed promptly, with affidavits showing the buyer is not actually pursuing the case, cannot perform, or filed only for leverage — can put the seller back in control of the property quickly.

The Buyer's Strategic Calculation

For the buyer considering whether to file, the questions to think through include:

• Is the contract clear enough that specific performance can be obtained?
• Is the buyer actually able to close — with financing in place, deposit funded, and no outstanding contingencies?
• How long is the buyer willing to keep the deposit tied up in escrow?
• What are the buyer's litigation costs likely to be?
• Is there a backup property the buyer would rather move on to?
• Are there other ways to recover damages — for example, an order returning the deposit plus other damages — that do not require tying up the property?

If the answers all point in the same direction, a lawsuit and notice of pendency may be the right tool. If they point in different directions, an alternative strategy may be better.

The Seller's Strategic Calculation

For the seller on the receiving end of a notice of pendency threat, the analysis is the mirror image:

• How quickly does the seller need to close on a sale of the property?
• Is the seller's title clean, and is the contract's terms genuinely subject to specific performance?
• How much would the seller lose by tying up the property for the time it takes to litigate?
• What is the cost of fighting versus the cost of settling?
• What evidence is there that the buyer is bluffing — for example, that they cannot actually close?

Often the seller can call the buyer's bluff by serving discovery designed to prove the buyer's inability to close. Bank statements, mortgage commitments, and employment verifications can all show whether the buyer's promise to perform is real.

Negotiated Resolutions

Most contract disputes that reach the notice of pendency stage resolve through negotiation rather than trial. Common compromises include extending the closing date for a defined period, reducing the price by a defined amount, returning the deposit with an additional payment for the buyer's expenses, allocating closing costs differently, or restructuring the deal to address the underlying problem (financing delay, title defect, condition issue). A well-drafted settlement agreement releases all claims, provides for cancellation of the notice of pendency, and includes liquidated damages if either side fails to perform.

Money-Damages-Only Disputes

As the page notes, a dispute that is only about money — for example, the return of a deposit after the buyer's mortgage falls through — does not support a notice of pendency. The lawsuit is for money, not for the property. The proper remedy is to sue the seller for the deposit and obtain a money judgment. Some buyers try to dress up money disputes as specific performance claims to get the leverage of a notice of pendency; that strategy invites cancellation and sanctions.

Statute of Limitations and Timing

Specific performance actions in New York are subject to a six-year statute of limitations under CPLR 213, running from the date of breach. In practice, buyers who want the property need to act quickly, both because their leverage diminishes over time and because the seller may attempt to convey to a third party. The earlier the notice of pendency is filed, the more effectively it locks down the property.

Costs and Attorney Fees

Many real estate contracts include attorney fee shifting provisions. The prevailing party in litigation may recover their attorney fees from the losing party. The risk of fee shifting is part of every settlement calculation. Even without contractual fee shifting, certain claims (such as deceptive practices claims under General Business Law Sections 349 and 350) carry their own fee-shifting statutes.

Call an Experienced Real Estate Litigator

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