Filing Successive Notices Of Pendency
This is another one of those titles which sounds technical and obscure, best left to lenders’ and servicers’ counsel. True, but the concept is so critical (albeit not new) that mortgage holders themselves should be familiar with the subject and – as economically as possible – that will be the mission here.
First, what is a notice of pendency (commonly called a lis pendens) and what relevance does it have to a mortgage foreclosure action?
The purely academic answer is that a lis pendens gives constructive notice to the world that an action is pending relating to the right, title, use or enjoyment of real estate. (That definition fits a mortgage foreclosure which seeks to extinguish title to real estate.) To better understand the question and the answer – and in the end the monumental practical significance of the lis pendens – review a brief scenario. A mortgage is in default and so a foreclosure is begun (in New York) by the filing of legal papers, the summons, complaint and (it is recommended) this thing called a lis pendens. The complaint in the action is based upon a title search that plaintiff’s counsel has obtained showing everyone with an interest in the property so they can all be named and so that their interest can be cut off. The goal is for anyone at a foreclosure sale to buy the property free and clear of all interests; that’s how the system of successfully holding mortgages and succeeding and protecting investments functions.
Suppose, however, that a week after filing of the summons and complaint the borrower “sells” the house to his cousin. That cousin will never be served with the summons and complaint and will remain completely unknown to the foreclosing plaintiff. When the foreclosure is over is the title of the cousin (who became the owner of the property) extinguished by the mortgage foreclosure action or not? (He was, after all, neither named or served in the action) The simple answer is that it is cutoff because the filing of that lis pendens at the beginning of the action bound anyone who later got an interest in the property to what happened in the mortgage foreclosure action – even though they have been unknown and unserved with legal papers. One can immediately see that the lis pendens is vital because if it did not serve the mentioned function, then as soon as the foreclosure action was begun, the borrower could convey property to some compliant friend or relative and if the lender tried to pre-empt any such scheme by doing a search and locating the new owner, the friend or relative would simply “sell” the property yet again to some other friendly helper. No foreclosure would even end and the system would collapse. So, obviously, the lis pendens is vital.
But a lis pendens has a life, or a duration, which in New York is three years. So, if the foreclosure action is delayed beyond three years (and it certainly does happen) the lis pendens expires. That would create a gap period during which the owner could convey away the property, or remortgage it, and the new owner (or new mortgagee) would not be bound by the foreclosure action and that would, in the vernacular, mess up the whole thing. Obviously then, a lis pendens should be renewed and if an application is made to do that before it expires, the court is clearly empowered to grant the extension or the filing of a new lis pendens.
So far everything works nicely – except that in real estate cases generally, if a lis pendens expires, the plaintiff is not entitled to file a new one and that issue was strongly underscored by a decision of the New York Cout of Appeals called the Sakow case. On the precedent of Sakow, a lower-level appeals court in New York City ruled that when a lis pendens expires in a mortgage foreclosure action, the foreclosing party was not entitled to a new one. Well, that presented a potential disaster for every delayed foreclosure where somehow the extension of the lis pendens might not have been applied for before its expiration. It would mean that the lender would simply be unable to foreclose the mortgage because the statute in New York mandates that a lis pendens be on file before a judgment of foreclosure and sale can issue.
This was such a dangerous decision that it was reargued before the court which issued the unfortunate ruling and the court did something it rarely does – reverse itself. [See Campbell v. Smith, 309 A.D.2d 581, 768 N.Y.S.2d 182 (1st Dept. 2003).] The essence of that decision was that because the statute which controls foreclosures in New York does indeed require that a lis pendens be filed to prosecute the foreclosure action to a conclusion (that is to obtain a judgment) the foreclosure case presents an exception to the general rule so that a successive lis pendens is available and can be filed so long as court permission is obtained. This saves the day for lenders and servicers. Indeed, the issue was so compelling that it elicited passage of an actual confirmatory statute: CPLR §6515 which closes the issue.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2024), is a partner with Berkman, Henoch, Peterson & Peddy, P.C. in Garden City, New York. He is also a member of the The American College of Real Estate Lawyers, a fellow of The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.