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Lien Lis Pendens in Tennesssee

A lien lis pendens can be a very effective tool not only to preserve a claim against real estate, but also, to create leverage in litigation. Tennessee’s lien lis pendens statute is about as clear as mud, even to those of us accustomed to deciphering statutes drafted in the early twentieth century. To boot, Tennessee courts have given as little guidance to practitioners on the matter of liens lis pendens than on about any other legal topic of comparable significance of which I am aware.

What is a Lien Lis Pendens and What Does It Do? 

Before the enactment of the Tennessee lien lis pendens statute in 1932, under Tennessee common law, whenever a lawsuit was filed which asserted a claim in, or against, a specific piece of land, a lien was created against the land from the date of the filing of the suit. That lien was effective against all persons who might acquire an interest in the land after the lawsuit was filed.

The purpose of the lien lis pendens was to enable the court hearing the lawsuit to retain jurisdiction over the land pending the conclusion of the lawsuit. Without the lien lis pendens tool, a defendant sued over an interest in land might easily avoid justice by selling the land after the filing of the lawsuit. (If the defendant sold it to a bona fide purchaser, it would not be a fraudulent transfer which could be set aside.)  Court’s don’t like their judgments frustrated, and the lien lis pendens was created to prevent that.

Before the enactment of the lien lis pendens statute, the mere filing of the lawsuit created the lien lis pendens. That is not the case anymore (as discussed below).

The filing of the lien lis pendens does not create a substantive legal right. It is a place holder, and an effective one, designed to protect the plaintiff’s rights in the property should the plaintiff prevail. Obviously, the lien would be ineffective upon the resolution of the case in favor of the defendant.

Once a lien lis pendens is placed on property, until it is dissolved or removed, it will effectively prevent the transfer or encumbrance of the property.

When Can a Party Obtain a Lien Lis Pendens?

The problem with the Tennessee lien lis pendens statute is that, after referring to several types of specific actions in which a lien lis pendens is allowed, it uses the incredibly open-ended phrase “or otherwise” to describe the types of actions for which the lien is appropriate. Regardless of that phrase, there is no doubt that a Tennessee court would dissolve any lien lis pendens that was based on a claim wholly unrelated to the real estate on which the lien was placed. For example, if Plaintiff sued Defendant for goods for which the Defendant failed to pay and placed a lien lis pendens on the Defendant’s real estate, no Tennessee court would let that lien stand. A lawsuit strictly for money damages will not support a lien lis pendens.  (Plaintiffs in such cases might be able to tie up real estate owned by the defendant by a pre-judgment attachment).

An example of a case in which a lien lis pendens would be unquestionably appropriate would be one where Plaintiff sues Defendant for failing to convey real estate (against which the lien was placed) after Plaintiff paid the agreed purchase price.

The Tennessee lien lis pendens statute also allows such a lien “in furtherance of setting aside a fraudulent conveyance.” In some cases, the real estate at issue will be so connected to the fraudulent conveyance that the plaintiff will surely be entitled to a lien lis pendens. For example, if the Defendant agreed to convey the land to the Plaintiff and then transferred it to a third party, a lien lis pendens on the land would be proper. However, it is easy to imagine a situation where the real estate’s relationship to the plaintiff’s fraudulent conveyance claims might be more attenuated, and where a court might dissolve a lien lis pendens.

Because of the scarcity of any Tennessee case law to guide us, it is helpful to look to some other states for guidance. Here are some helpful cases from other states which I believe a Tennessee court would find persuasive and might follow:

Wardley Development, Inc. v. The Superior Court of Los Angeles, et. al., 213 Cal.App. 3d 391 (Cal. Ct. App. 1989): The plaintiff sued the defendant for defaulting on a loan.  The plaintiff alleged in its complaint that the defendant transferred cash to a corporation which it alleged that the defendant controlled and in which he had an interest.  It alleged that the corporation used the cash transferred to buy real estate. The plaintiff obtained the lien lis pendens against that real estate.  The court dissolved the lien finding it not appropriate because the plaintiff’s claims amounted to an action for money damages unrelated to the real estate.

Worldwide Development Kendale Lakes West v. Lot Headquarters, Inc., 305 So.3d 271 (Fla. Ct. App. 1974):  The defendant purchased property.  The plaintiff sued the defendant claiming that it was the broker for defendant and was entitled to a commission. The defendant placed a lien lis pendens on the real estate the defendant purchased. The court dissolved the lien. For another similar brokerage commission case with a similar result see Richards v. Chuba, 91 N.Y.S.2d 197 (N.Y. Sup. Ct. 1949).

Blue Star Palms, LLC v. LED Trust, LLC et. al., 128 So.3d 36 (Fla. Ct. App. 2012): The plaintiffs sued defendant Blue Star claiming that they were deprived of the opportunity to become shareholders in Blue Star’s parent company and to participate in the development of certain condominiums. Blue Star, the plaintiffs alleged, was formed to develop the condos. So, the plaintiffs sued Blue Star and obtained a lien lis pendens against the condos. The court dissolved the lien since there were no claims against the condos, and since the plaintiffs’ claims resulted from their failure to become owners, not of the condos, but of the stock of Blue Star’s parent.

How is a Lien Lis Pendens Obtained?

It is easy to obtain a lien lis pendens. A plaintiff need only file a complaint with an attached abstract (description of the real estate) and request the issuance of the lien. Upon the filing of the lawsuit, the clerk will certify the lien lis pendens. No motion or court approval is required for the issuance of a lien lis pendens. Once the lien is issued, it should be filed with the register of deeds in the county in which the real estate is located.

A lien lis pendens is effective if filed in the county in which the real estate is located, even if it was issued by a court in another Tennessee county. See, Figlio v. Shelley Ford, Inc., 1988 WL 63497 (Tenn. Ct. App. 1988).

If a party believes that the lien lis pendens is improper, the party can proceed by filing a motion to have the lien dissolved and removed.

For Tennessee real estate litigation lawyers, there is wide latitude under the lien lis pendens statute given the current lack of guidance and wording of the statute. This latitude, in my opinion, allows for the good faith filing of such liens in circumstances under which a good faith filing may not be able to be made in the future after our courts have issued more opinions.