What is adverse possession?
Adverse possession is a legal doctrine that transfers property ownership based on continuous occupancy over an extended period of time. While the definition varies from state to state, generally, a person may acquire the legal rights to a property simply by using it. Typically, this applies to possession of land or buildings, also known as “real property.”
Adverse possession is sometimes known casually as “squatters rights” or homesteading, which might bring a sense of deception to mind. But in practice, adverse possession is much less sinister.
Most adverse possession cases involve disputes over things like fence placements, boundary lines, or driveway pourings. Neighbors may inadvertently take possession of land next door by working from a faulty survey or property description. Years later—perhaps when it comes time to sell—the discrepancy is uncovered and legal possession may need to be determined.
As mentioned, individual state law proscribes the elements required to make a claim of adverse possession. However, in the United States, the following requirements remain constant in some form or another.
- Actual and continuous: The adverse possessor must maintain a physical presence on the property for a set period of time. Some states require proof of maintenance or even taxes paid during htat time period.
- Exclusive: The person claiming adverse possession must have exclusive possession of the property. Sharing the area with strangers or the owners negates this point.
- Hostile: This doesn’t refer to violence. Instead, think of trespassing, whether intentionally or not. Further stipulations vary by state. In fact, some states require that claimants show “good faith”—or the belief that they truly did own the property.
- Open and notorious: The possession is obvious to anyone who would choose to observe it.
Though all of these requirements are important, the first point in the doctrine of adverse possession—the actual and continuous use of the property—is key and not easily satisfied. Some states require five to seven years of continuous possession with a document, deed, or paid tax bill as proof. On the higher end, other states institute a statutory period of 20 years or more.
“Color of title” is one type of adverse possession that can be especially concerning for investors—especially if you specialize in buying distressed properties. This is when someone has a deed or title that appears to be valid… but isn’t. It could be your title that’s defective (especially if you didn’t pay for title insurance), or perhaps a relative or former owner believes they still have a legitimate deed.
Adverse possession vs. prescriptive easement
Prescriptive easement is very similar to adverse possession, and many of the requirements are the same: Continuous usage of a property or part of the process. The main difference is that prescriptive easement does not grant the possessor the title to the property. Instead, it grants them an easement—the right to use that particular part of the property as they have been doing.
For example, rural property that’s been used as a de facto walking trail by the neighbors may create a case for prescriptive easement. But an actual boundary dispute would be a case for adverse possession, where the original owner may even lose their title entirely.
How to prevent adverse possession
The number-one key to preventing adverse possession is paying attention. If you own vacant land or properties, make sure you—or a member of your team—checks up on them regularly. Remember, the adverse possessor needs to be on the property without the land owner for a certain amount of time. Regular drive-bys are essential for identifying nefarious actors long before that time limit and taking appropriate, timely legal action.
Additionally, don’t allow anyone to use your land or property without a written agreement. Perhaps the next-door neighbor wants to park in your driveway—and perhaps you have no problem with that. After all, the driveway is currently unused. Make sure to write up an agreement for the exact usage you’ve permitted. This can prevent against future adverse possession claims.
Physical prevention helps, too, especially if you have a large swath of land with borders that are hard-to-control. A fence clearly demarcates the boundaries, and can help prove that you did not allow the trespasser onto your property if the case goes to court. “No trespassing” signs can be helpful, too.
Make sure to address all adverse possession claims before the statutes of limitation dry up. These limitations affect how long you have to bring a case, and vary based on state and jurisdiction. Your state, for instance, may give you only three years. Make sure to get legal advice to ensure you understand the statute of limitations in your location.
Adverse possession and real estate investors
Property owners must be vigilant about their boundaries to ensure they maintain legal ownership via actual possession of the property. In most urban and suburban settings, this task is fairly easy and somewhat obvious. Before a neighbor puts up a shed near your lot line, have a friendly chat about double-checking your titles before construction. That way, you can avoid potential issues in the future.
In rural areas where properties are large and more obscurely marked, maintaining boundaries may take a little more effort. A farmer may want to travel the property lines once a year to ensure the neighbor’s seeds or animals haven’t wandered. Otherwise, over time, neighboring farms may occupy the land in slivers and gain ownership through adverse possession.
Investors looking to purchase property should insist upon a survey and title search in order to clearly define lot lines. If there’s a discrepancy—like a shed encroaching on your property—an agreement will need to be made before the purchase. title insurance companies will not insure a title with property encroachments.
Sometimes neighbors can work out a compromise or even a sale of the property portion in question. Together, they can change the legal title with the help of a real estate lawyer. If no agreement can be reached, a “quiet title” lawsuit is filed. Then, a judge will determine the true owner—possibly through adverse possession statutes.
To protect possession, owners should always draw up usage documents, such as leases, easements, or even informal letters. (For example, a simple email documenting permission for someone to use a corner to grow their garden.) A rental agreement or easement makes an adverse possession claim impossible to win. No acquired title will be issued to the user, and you keep possession of your property.
Adverse possession needs to be taken seriously, since it’s a variable legal statute in all states. But thanks to the strict requirements involved in adverse possession cases, property owners can protect themselves against adverse possession.
Learn more on BiggerPockets:
Interest rates determine how much it costs to borrow money, like when buying a house, or how much return you’ll receive on an investment.