The ink has long since dried on the purchase and sale agreement for that seaside inn you have always dreamed of owning, but the seller has backed out at the last minute without explanation and failed to attend the closing. You suspect that another buyer has offered a higher price and the seller will try to close on that better deal post haste. You’ve done your due diligence – you know the inn is profitable and is exactly what you have been looking for. You want this property, and you want it for the price you have agreed to pay. How can you protect yourself from losing this special opportunity to the third party buyer waiting in the wings – whose identity you don’t know?
The obvious answer is to bring a lawsuit against the seller for specific performance and immediately seek to record a memorandum of lis pendens – a tactic that is effective to preserve a thwarted buyer’s rights against unknown third parties, but is not without risk.
The Massachusetts lis pendens statute is set forth at G.L. c. 184, § 15. It states that a proceeding “affect[ing] the title to real property or the use and occupation thereof or the buildings thereon” will have no effect on any persons other than the parties to the proceeding, their heirs and devisees, and those with actual knowledge of the action, unless and until:
“a memorandum containing the names of the parties to the proceeding, the court in which it is pending, the date of the writ or other commencement thereof, the name of the town where the real property liable to be affected thereby lies and a description of the real property sufficiently accurate for identification is recorded in the registry of deeds for the county or district where the real property lies.”
G.L. c. 184, § 15(a).
The purpose of the statute is to remedy a harsh common law rule that held that if real property was sold while a suit was pending, the buyer’s interest was subject to a judgment entered in a suit as to which the buyer had no knowledge. See Wolfe v. Gormally, 440 Mass. 699, 703 (2004). Under the statutory law, a buyer’s interest in real property is not subject to a pending lawsuit unless he or she has actual knowledge of the suit, or “‘a memorandum of lis pendens was filed in the registry of deeds before the acquisition.'” Wolfe, 440 Mass. at 702, quoting Debral Realty, Inc. v. DiChiara, 383 Mass. 559, 561 (1981). See also G.L. c. 184, § 15(a).
A Court “shall” endorse a memorandum of lis pendens upon motion if the pending action constitutes “a claim of a right to title to real property or the use and occupation thereof or the buildings thereon,” unless the Court orders other relief that will preserve the status quo. G.L. c. 184, § 15. (Despite the broad language about the “use and occupation” of real estate or buildings, however, the statute expressly excludes zoning appeals from the types of cases as to which a memorandum lis pendens must issue upon request. See G.L. c. 184, § 15(f)..
Although a memorandum of lis pendens is effective to protect a thwarted buyers’ chance to obtain title to the property, seeking one is not without procedural pitfalls.
First, the lis pendens statute requires a special certification to be included on a “verified” complaint, which states “under penalties of perjury that the complainant has read the complaint, that the facts stated therein are true and that no material facts have been omitted therefrom.” See G.L. c. 184, § 15(b). This means that the Complaint filed in support of an application for a lis pendens memorandum must be signed personally by the plaintiff, not just his or her lawyer, and must include a certification that the plaintiff has not omitted any “material facts.” See id..
This is in contrast to the usual rule of pleading in Massachusetts, which states that an attorney signing a complaint certifies that: “he has read the pleading; that to the best of his knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay.” See Mass. R. Civ. P. 11(a). Normally, recitation of all “material facts” – including adverse facts – is not required under the notice pleading standards that govern initial complaints. See Mass. R. Civ. P. 8(a) and 11(a). The party and attorney contemplating seeking a memorandum of lis pendens must, however, give thought to the facts that could be considered “material.” The value of obtaining a lis pendens should be weighed against the burden of certifying that all such facts have been included – including facts that may not support the plaintiff’s position.
Perhaps more importantly, however, a motion for a memorandum of lis pendens is an invitation to the defendant party to request an early evaluation on the merits of the case – where an award of attorneys’ fees will be at stake. In addition to seeking to dissolve a memorandum of lis pendens issued ex parte (i.e., without notice to the defendant), a seller-defendant may bring a “special motion to dismiss” the case. See G.L. c. 184, § 15(c)..
The special motion to dismiss is available if the defendant “believes that the action or claim supporting the memorandum of lis pendens is frivolous.” Moreover:
“The special motion to dismiss shall be granted if the court finds that the action or claim is frivolous because (1) it is devoid of any reasonable factual support; or (2) it is devoid of any arguable basis in law; or (3) the action or claim is subject to dismissal based on a valid legal defense such as the statute of frauds. . . . If the court allows the special motion to dismiss, it shall award the moving party costs and reasonable attorneys fees, including those incurred for the special motion, any motion to dissolve the memorandum of lis pendens, and any related discovery.”
G.L. c. 184, § 15(c) (emphasis supplied). In other words: (i) if a claim in which a memorandum of lis pendens is sought is deemed “frivolous” and dismissed, an award of fees to the moving party is mandatory under the plain language of the statute; and (ii) an attempt to enforce an agreement that does not satisfy the requirement found in the statute of frauds of a “writing” signed by the “party to be charged therewith” (see G.L. c. 259, § 1) is highly likely to be deemed “frivolous.”
None of this is to suggest that thwarted buyers faced with losing a coveted parcel of real estate to an unknown third party should forego the opportunity to record a memorandum of lis pendens. Despite the time pressure to file quickly when another buyer may be about to snatch the property away, however, parties and counsel should pause long enough to consider questions such as: (i) What facts are material to the case, and what adverse facts (if any) will have to be disclosed in the verified complaint; (ii) is the statute of frauds satisfied; and (iii) is there any other basis on which the claim could be deemed to be frivolous?
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