Abandoned Real Estate. Renting what you don't own. Can this be legal?

This blog discusses the legal implications of taking over “Abandoned” Real Estate and the laws regarding the Adverse Possession of real property. Can people really find and occupy, or rent out Real Estate which they do not own, especially if they do not have the owner of record's express permission? The average response is, “That can’t be Legal?”

There are many mistaken ideas about what "Abandoned" means in the eyes of the law and what the courts require to prove a claim of Adverse Possession. Be advised, I’m not a lawyer, but I am in the arena, and willing to share what has been working for me. If you have reason to believe I’m wrong, add your thoughts to the comments. Input from readers is sought and always appreciated.

The laws referenced in this blog are Washington State laws. Similar legal principles do generally apply in other states, but the laws of each State are different in important ways. Determine the law in your state before assuming that what works for me here, will also work somewhere else. In discussing little used laws like adverse possession, it is critical to define terms. For example, the definition of “Abandoned” as used by me and as interpreted by the courts, includes an intention to relinquish ownership, that may be quite different from your definition. As much as possible, this blog will use terms as defined by Washington courts. Citations to statutes and court cases will be included.

Of course, the conduct described in this blog is not suitable for everyone. The practice of acquiring “abandoned” real estate, the way I do it, can take years to become profitable. Numerous commentators have noted that; “There are a lot of better ways to make money in real estate.” For many people that is certainly true. The methods described here require an above average assertiveness, a willingness to argue the governing statutes, a willingness to utilize the courts, and a willingness to stand firm with police, who can have their own definitions of what the law permits.

Not Just Vacant or Derelict. The owner has walked away -permanently.

The properties involved in this blog are not just vacant. Being vacant or derelict is not enough. The focus here, is on those rare properties where the owner intends to relinquish his/her rights AND the lien holders have mostly given up on the debt owed to them (there are usually multiple liens). The owner has died or walked away, given up all interest, does not intend to return. Nobody is maintaining the property. Nobody is paying the taxes. And nobody is foreclosing -except the county property tax collector.

The properties that interest me are typically places of waste, vagrancy, neglect, and often, impending ruin. This blog is about finding property that is intentionally "abandoned". When such a property is found, I document the owner’s abandonment when explicit, or prove it by clear and convincing evidence when implicit. Only, after clearly and convincingly documenting the evidence of owner of records explicit or implicit intent to abandon their property, will I begin to use it as though it were my own.

I occupy and subsequently rent "abandoned" real estate with no claim nor even ‘color of title’ (a faulty claim of title). I collect rent on properties I do not own. The rents collected are used to pay the property taxes, and to pay for necessary property maintenance. Renting out a property that I do not own! Isn’t that fraud? Isn’t that deceptive?

This blog is my story of taking possession of legally "abandoned" properties and renting them -even though the title owner has not given his permission. Can that be legal? Most people, including most professional real estate investors, declare such conduct to be, at minimum, "highly questionable". Moral code says, "If it’s not yours leave it alone!"

An Attorney was asked, "Can this be legal?"

A few years ago, a well-respected, well-educated attorney, Annie Fitzsimmons of Lakewood WA, who specializes in Real Estate law, was asked to provide her professional opinion about my conduct.

It wasn't until recently, that I found out the good Doctor of Jurisprudence had declared my hobby to be criminal in nature. She is a Real Estate Attorney, engaged by Realtors, to advise Real Estate agents on matters of Real Estate law. She should know. Attorney Fitsimmons stated in writing that my hobby[1] constitutes trespass, theft and fraud. Most people would agree. Isn’t that just common sense? Think of what a judge would say. Think of what the law says.

You know what? I checked what the law says, and how judges’ rule. That is why I continue to take over abandoned real estate.

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The full text of Attorney Fitzsimmon’s opinion, and my response will follow. You may also wonder; What kind of a rental agreement could possibly be used to rent out property which I do not own, and do not have the owner's permission to be using. Wouldn't creating a written agreement to rent someone else's real estate be hard evidence of fraud? I will post my rental agreement too.

Why Would Anyone Take Over Abandoned Real Estate?

There is some money in it. Abandoned real estate offers decent potential for gain. Over six years, I've been able to control almost a dozen "abandoned" properties, -just under two per year. While most abandoned real estate consists of vacant lots, some do have utilities installed. Lots with utilities can easily be rented. Almost anywhere in the Western U.S, there are people eager to rent a lot that has power, water, and sewer or septic. It is sad but real, that many thousands of our neighbors cannot afford an apartment. Nonetheless, they seek a place to call their own. A lot with utilities, or even a seriously derelict home can be a prize, compared to a tent on the public street.

Each lot is currently worth over $50,000. If a court eventually awards the title of these properties to me via the WA law of adverse possession (requires 7-10 years), the total value of the 11 abandoned properties that I currently occupy through my tenants, would be over $600,000. Assuming, I add a couple more properties each year to the existing 11 and add a few more years’ worth of accrued rents from each property, it can be seen that these small time, overlooked lots and once deteriorating homes, are most likely to provide over a $1,000,000 in cash and real estate assets by the time the 10 year period of adverse possession has run.  (Under WA law, rents which accrue from the unauthorized rental of R.E., remain the property of the owner of record.  If not collected by the owner, those rents become the property of the previous owner's estate, until the statute of limitations expires, at which time they will also become mine.)

Accruing over a$1,000,000 in rent and real estate is not a bad return on 10 years of part time effort which requires almost no cash input, helps the poorest of our neighbors improve their lives, prevents waste in the neighborhoods, supports the county tax base, and thus far, creates no tax burden or business reporting requirements for me.

Who Pays Tax on the Rents, And When?

A significant attraction of Abandoned Real Estate, for me, is the greater freedom it provides from Government regulation. I am motivated to have less regulation, less reporting requirements, and less tax liability.  Government is not our friend. “Government is not reason, it is not eloquence, it is force. Like fire it is dangerous when you can get government to serve you, and fearsome when it becomes your master.” (Paraphrase of a quote commonly attributed to George Washington)[2]

Here is a question, Who pays income tax on the rents received from these properties?  State law says the rents are the property of the owner of record on title. Under, Washington State law the rents are not mine.  Under IRS rules, I'm required to report and pay tax on my income, not on income I have no lawful right to, and have not used.  The timing of when, if ever, these real estate parcels and the rental income from them, is under my control. (Provided I can get a judge to agree that such properties are mine via adverse posssession.)

Not saying I’ve figured it all out. Mistakes will be made. I look forward to correction, comments, and advice from readers. Maybe you work for the IRS?, or maybe you re a CPA or Attorney who can clarify when tax liability occurs and for whom regarding the rents I've collected from "abandoned real" estate?  Whoever, you are your comments and thoughts are valuable and welcomed.

Best Wishes, Davido

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[1] The IRS labels activities as a "hobby", not a business, unless those activities are reasonably likely to produce a profit. It’s been almost six years that I’ve been collecting rent on property owned by other people. So far, my activity has produced no profits for me. I therefore, acquiesce to the IRS and call my conduct a hobby. I have no business license, no business income, and apparently no reporting requirements.

[2] Despite official findings to the contrary, the complete destruction of WTC buildings 1, 2, & 7 on Sept.11th, 2001, were obvious controlled demolitions.  Such complete, instantaneous, intentionally controlled demolition of 3 major U.S. buildings could only have been accomplished and covered up by those who control the highest levels of the US Government. The events of September 11, 2001 are proof to any honest observer that psychopathic mass murderers control the levers of power in the U.S..  The evil of those in control of our government has been left unchallenged, which means their corrupt rule is destined to become worse. Our elected representatives are not in control the U.S. government, and the criminals who are, do not rule the world to help the common man or woman.  They will be fearsome as they claim their mastery over us.