When Does a Document Recorded Against Real Property Constitute a “Slander of Title” and What Can You Do to Remove It?
All deeds, powers of attorney, agreements, and other instruments conveying, encumbering, or affecting title to real estate, including certified copies of orders, judgments, and decrees of courts may be recorded in the office of the clerk and recorder for the county in which the real estate is located. Moreover, any document that is not recorded is invalid as against any class of persons with any kind of rights in the property who first records, except as between parties to the document and those who have notice of the document. This is commonly referred to as a race-notice recording rule, practically meaning, the first person to win the race to the clerk and recorder’s office to record their document will be given priority over any subsequently recorded document.
One claiming to be a creditor of another, who is involved in a legal proceeding with the other, and asserting an interest in real estate which is at issue in the litigation, might record a notice of lis pendens. The filing of a notice of lis pendens is merely the recording of a statement that an action is pending in court, the outcome of which may affect title to real estate. The filing of the notice is, from the time of its filing, notice to all persons who may subsequently acquire any right, title, interest, or estate in or to the real property described in the notice from any grantor or source whatsoever. Therefore, if a notice of lis pendens is filed in the chain of title to real property, any other person looking to acquire or obtain an interest in that property will take the property subject to the litigation referenced in the notice of lis pendens. Accordingly, if a notice of lis pendens appears in the chain of title, it is imperative that the underlying litigation be investigated further to determine its implication as to the real property.
Under Rule 105(f) of the Colorado Rules of Civil Procedure, a notice of lis pendens may be filed only after a pleading has been filed in court in which affirmative relief is claimed affecting title to real estate. The notice should contain the names of the parties to the action, a statement of the nature of the claims asserted, and a legal description of the property. The filing party must show that the underlying action relates to a right of possession, use, or enjoyment of the real estate. If the notice fails to meet these standards, it will be void; however, in order for a court or title company to recognize the document as void, more often than not, it will be necessary to obtain a court order declaring the same.
Any interested person may petition the court to find that the action pending will not affect title or an interest in or to all or a designated portion of the real estate. Any order entered on such an application should specifically describe the property. Any person holding, or appearing to hold an interest in real property may also disclaim an interest in real estate by filing with the court a document so stating and referring to the notice of lis pendens and its recording information. However, it is important to understand that the filing of a disclaimer of interest in real property creates a jurisdictional bar to making further claims to that property, and the bar is absolute absent fraud or duress.
Similarly, it is important to recognize and understand that the recording of a document in the chain of title to real property that contains a falsity, or otherwise improperly slanders title, constitutes a violation of Colorado law. Any person who offers to have recorded any document purporting to create a lien against real estate, knowing or having reason to know that the document is groundless or invalid will be liable to the owner of the real estate for a sum not less than $1,000, or for actual damages caused, together with reasonable attorneys’ fees. A “groundless document,” for the purposes of this statutory prohibition on recording of a spurious lien or groundless documents, is one as to which a proponent can advance no rational argument based on evidence or law to support his or her claim of a lien. A spurious lien or document may be promptly removed from the chain of title by the filing of an expedited proceeding known as a spurious lien action under C.R.S. § 38-35-201. Further, as a lis pendens is subject to analysis as a spurious document, a trial court may award attorney fees and costs to a person left with no choice but to pursue litigation to remove a spurious lis pendens, or other spurious document. Therefore, if in doubt regarding whether a document may be properly recorded, or whether a document already recorded in the chain of title to real property is properly recorded, or slanderous, it is imperative to understand your legal rights and remedies. If you have any questions regarding this article, what constitutes “slander of title,” or your options and remedies regarding the same, please contact our office for legal advice.
Reprinted from Colorado Creditors’ Remedies—Debtors’ Relief, Volumes 9 and 10 in the Colorado Practice Series, with permission of Thomson Reuters. For more information about this publication please visit www.legalsolutions.thomsonreuters.com.