Gay v. Classic Quality Homes, PICS Case No. 14-0147 (C.P. Monroe Dec. 30, 2013) Zulick, J. (7 pages).

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The Legal Intelligencer

RESIDENTIAL AND COMMERCIAL REAL ESTATE

Lis Pendens • Restrictive Covenant • Right of First Refusal

Gay v. Classic Quality Homes, PICS Case No. 14-0147 (C.P. Monroe Dec. 30, 2013) Zulick, J. (7 pages).

In a dispute over real property, Gay began this action with a praecipe for a writ of summons and a praecipe to index the case as a lis pendens and, at a hearing on the motion to strike the lis pendens, he contended that he was entitled to a right of first refusal on Lots 43, 51 and 58 at the time they were sold at judicial sale. He argued that Classic, the purchaser at judicial sale, must now give him the right to purchase the properties for the price Classic paid for them. Classic filed a motion to strike lis pendens and sought its counsel fees. Motion denied.

Gay alleged that restrictive covenants on the lots recorded in 2001 gave him the first right of refusal to purchase the property. The covenants contained no description of the property other than a hand-written notation on the front page of a tax code number. Classic bought the properties at judicial sales in May 2012 and June 2013. Gay sent a letter to Classic advising that he had not released his right of first refusal on the properties on September 11, 2013.

A judicial sale does not sell a property free and clear of existing easements and covenants. Gay argued that the judicial sale was subject to his right of first refusal. The covenant providedthat "if in the future they decide to sell the home site…." In this case the property was sold a judicial sale due to non-payment of real estate taxes. The seller did not "decide to sell the home site" or "receive an offer to purchase the property". The sale of the owner's interest was an involuntary one. Thus, the right of first refusal in the restrictive covenant gave Gay no rights due to the judicial sale. However, the judicial sale did not remove the recorded covenants from the title to the property to the extent that they encumbered these lots.

The indexing of a lis pendens does not establish an actual lien on the property affected. The purpose of the lis pendens is to put third parties on notice that the real estate is subject to litigation. Lis pendens has no application except in cases involving the adjudication of right in specific property. A lis pendens may not be predicated upon an action seeking to recover a personal demand.

Gay was not entitled to a lis pendens in violation of his right of first refusal due to the judicial sale nor for a violation of his right to an impact fee also found in the restrictive covenants. However, he might have been entitled to a lis pendens if his suit sought to prevent Classic's sale of Lot 51 to a prospective buyer without a release of his right of first refusal.

Since this suit was still at the writ of summons stage and Gay had not filed a complaint, the motion to strike lis pendens was denied.