By Eric Berman, REALTOR® | The Eric Berman Team at Compass
 

TL;DR:

Yes, usually — but the answer depends less on the litigation itself than on whether a document called a notice of pendency has been filed against the property. That filing appears in the title search and puts any buyer on notice that they take subject to whatever the court decides, which in practice makes a financed sale very difficult until it's resolved, vacated, or the parties reach an arrangement a title insurer will accept. The second question is whether a title company will insure over the risk and on what conditions. Both belong with a real estate attorney before anything is listed.

The Document That Actually Stops the Sale

Litigation doesn't block a sale by existing. It blocks a sale through a specific instrument, and understanding which one changes what a seller should do.

A notice of pendency — commonly called a lis pendens — is filed against a property in an action that affects title to it. Once filed, it appears in the title search, and it operates as notice to the world: anyone acquiring an interest in the property takes it subject to whatever the court eventually decides.

The practical effect is severe. A buyer's title company will see it, a buyer's lender will see it, and a financed transaction generally will not close over it. Not because anyone forbids the sale, but because nobody will insure or lend against a title outcome that hasn't been determined.

Three routes forward, all through counsel: the underlying action resolves, the notice is vacated or cancelled by the court or by agreement, or the parties construct an arrangement — typically involving escrowed proceeds and indemnities — that a title insurer will accept.

The first question for any seller in litigation is therefore narrow and answerable: has a notice of pendency been filed? A title search answers it, and it's worth running before listing rather than discovering the answer through a buyer's attorney.

Where no notice has been filed, litigation may complicate the sale without stopping it. Where one has, the sale is largely on hold until it's addressed. Those are very different situations and the seller should know which one they're in.

What Title Insurers Will and Won't Accept

The second mechanism gets less attention and decides as many outcomes.

A buyer's title company issues a policy insuring the buyer's title. Where litigation creates uncertainty, the underwriter has to decide whether to insure over it, exclude it, or decline. That decision, rather than any court order, is frequently what determines whether a transaction can close.

Underwriters do insure over some risks under conditions — an escrow holdback covering the disputed amount, an indemnity, a bond, or documentation resolving the specific concern. Those arrangements are negotiated between the attorneys and the title company, and what one underwriter accepts another may not.

For a seller, the useful step is to have their attorney raise the situation with a title company early, before listing, rather than discovering the underwriter's position eight weeks into a transaction. An attorney who knows what conditions an insurer will require can structure toward them from the start.

The Common Situations, Accurately

Four categories, and each behaves differently.

Divorce. Once a matrimonial action is filed in New York, automatic orders restrain both parties from transferring, selling, or encumbering marital property without written consent or a court order. Those attach on filing rather than at a judge's discretion — a stronger constraint than "the court may need to approve." Married couples also typically hold title as tenants by the entirety, requiring both signatures regardless. The full treatment of selling during a divorce covers what the orders permit and what a buyout requires.

Contested estates. Where heirs dispute a will or an appointment, a Surrogate's Court proceeding can suspend or limit the executor's or administrator's authority to convey. The question isn't whether the court will "delay" the sale — it's whether the fiduciary currently holds authority to sign a deed. That's answerable, and it's the first thing to establish. The walkthrough of an inherited house sale covers the ordinary sequence.

Title and boundary disputes. Easement claims, adverse possession claims, boundary disagreements, and mechanic's liens all affect title directly, and all are situations where a notice of pendency may be filed. Resolution or an insurable arrangement is required.

Foreclosure and bankruptcy. A foreclosure action generally involves a notice of pendency by construction. Where the sale would be a short sale — proceeds insufficient to satisfy the mortgage — the lender must approve the price, not merely consent to a sale, and that approval process is slow and independent of the buyer's timeline. Bankruptcy adds trustee involvement and, in many cases, court approval of the sale itself.

Disclosure Is Not a Marketing Decision

Pending litigation affecting title is material, and how it gets handled belongs with the attorney rather than in listing copy.

Two related points a seller should understand.

The buyer will find out. A notice of pendency appears in the title search, and a contested estate or a foreclosure action is in the public record. Litigation isn't concealable in a transaction where a title search is standard.

How and when it's disclosed matters. The attorney determines what is disclosed, in what form, and at what point in the process — and structures contract provisions accordingly, which may include contingencies, extended timelines, or escrow arrangements. A seller who describes the situation informally to a buyer or an agent has created statements nobody drafted.

The Property Condition Disclosure Statement is a separate obligation covering the physical condition of the property, and it applies as it does to any sale. Litigation over title is a different matter handled through the contract and the title work rather than through that form. The full treatment of what the disclosure form asks covers its scope.

What a Seller Can Control

Not much about the litigation. Quite a lot about everything else.

Engage a real estate attorney experienced with clouded title before listing, and make sure they and the litigation attorney are communicating. These are frequently different people, and the failure mode is each assuming the other has addressed something. The case for engaging counsel before listing applies with more force here than anywhere.

Run a title search early. It answers the notice of pendency question and surfaces anything else — old undischarged mortgages, liens, boundary issues — while there's time.

Handle the permit question. Municipal searches happen regardless, and an unclosed permit sitting with a village building department is an entirely separate problem that will compound a title one. The peninsula spans several incorporated villages plus unincorporated Town of North Hempstead area, each with its own records — the breakdown of which rules apply where sorts them out.

Price and prepare normally. A property with a title issue still has to compete on condition and price with everything else in its band. Litigation is a reason for a buyer to discount; a poorly presented home is a second reason, and there's no need to supply both.

A Worked Example

Consider a composite case — a Port Washington property held by an estate, with two heirs disputing the will's validity.

The executor assumed the sale had to wait for the dispute to conclude, which counsel estimated at a year or more. The first useful question was narrower: had a notice of pendency been filed? A title search confirmed it had.

The attorneys then worked toward an arrangement rather than a resolution. The heirs, who disagreed about distribution but not about selling, consented to a sale with proceeds held in escrow pending the outcome. A title company confirmed in advance that it would insure over the pendency given a stipulation and the escrow arrangement — which took about five weeks to structure.

The property listed with the situation handled through the contract rather than described in marketing. It sold to a financed buyer whose lender was satisfied by the title commitment.

The dispute continued for another eight months. The sale didn't wait for it.

Where to Start

Run a title search and find out whether a notice of pendency has been filed. Engage a real estate attorney experienced with clouded title, and make sure they're talking to the litigation attorney. Have that attorney raise the situation with a title company early to learn what an underwriter would require. Establish who currently holds authority to convey. Call the building department about permits, since that's a separate problem. Then price and prepare the property normally.

Sellers wanting a starting read on value can begin with a quiet look at current figures.

The Honest Bottom Line

Most homes in litigation can be sold. The question is rarely whether the court permits it and usually whether a title insurer will write over it — and that's a question with a defined answer that a seller can pursue early rather than discover late.

The first step costs a title search and a conversation. Finding out whether a notice of pendency exists, and what an underwriter would need, converts an open-ended worry into a specific problem with specific requirements. Sellers who do that in week one often find the sale is more possible than they assumed.

Eric is a REALTOR®, not an attorney, and every question in this territory belongs with counsel. For anyone working through a specific situation, with no pressure attached, that conversation is available whenever the timing suits.

This is general information, not legal advice. Notice of pendency mechanics, vacatur, title insurance underwriting, fiduciary authority, and court approval requirements all turn on the specific action and property. Consult a licensed New York real estate attorney and your litigation counsel about your circumstances.

FAQs

What is a notice of pendency and how does it affect a sale?

A notice of pendency, or lis pendens, is filed against a property in an action affecting title to it. Once filed it appears in the title search and operates as notice that anyone acquiring an interest takes it subject to whatever the court decides. The practical effect is that a financed transaction generally won't close over it — not because the sale is forbidden, but because a title company won't insure and a lender won't lend against an undetermined outcome. The first question for any seller in litigation is whether one has been filed.

Can I sell if a notice of pendency has been filed?

Sometimes, through one of three routes: the underlying action resolves, the notice is vacated or cancelled by the court or by agreement, or the parties construct an arrangement a title insurer will accept — typically escrowed proceeds with indemnities or a stipulation. That third path is how many of these sales actually close, and it's negotiated between the attorneys and the title company. Having counsel raise the situation with an underwriter before listing reveals what conditions would be required.

Does litigation always stop a home sale?

No. Litigation that doesn't affect title may complicate a sale without stopping it, while an action affecting title — with a notice of pendency filed — largely puts it on hold until addressed. The distinction is what a seller most needs to establish. A divorce carries automatic orders restraining transfer of marital property once filed. A contested estate may suspend the fiduciary's authority to convey. A title or boundary dispute goes directly to what's being insured. Each behaves differently and the answer comes from counsel.

Do I have to tell buyers about pending litigation?

Pending litigation affecting title is material, and how it's disclosed belongs with the attorney rather than in listing copy. Two things follow. The buyer will find out regardless — a notice of pendency appears in the title search, and a contested estate or foreclosure is in the public record. And the attorney determines what is disclosed, in what form, and when, and structures contract provisions accordingly. A seller describing the situation informally has created statements nobody drafted.

What can a seller do while litigation is pending?

Quite a lot. Run a title search to establish whether a notice of pendency exists. Engage a real estate attorney experienced with clouded title and make sure they're communicating with the litigation attorney, since those are often different people. Have counsel raise the situation with a title company early to learn what an underwriter would require. Establish who currently holds authority to convey. And handle the permit question separately, since municipal searches happen regardless and an unclosed permit compounds a title problem.

By Eric Berman, REALTOR® | The Eric Berman Team at Compass

Eric Berman | Long Island & Queens Associate Broker | Compass
1468 Northern Blvd, Manhasset, NY 11030
(917) 225-8596 | eric@ericbermanre.com | theericbermanteam.com