March 23, 2017
Most buyers assume that, when they purchase a property, their right to occupy and enjoy that property is exclusive. This is usually a reasonable assumption. However, there are instances when third parties (typically, adjoining landowners) can lawfully claim an interest in land owned by another. Here, we examine two such claims and ways in which buyers can protect themselves.
1. Adverse Possession
The doctrine of adverse possession has a lengthy and storied legal history. In layman’s terms, adverse possession is a process by which a person who has no ownership interest in a piece of property can nevertheless acquire title to that property. A would-be adverse possessor must:
A. Physically occupy the property with the intent to keep it as his own while knowing that the property does not, in fact, belong to him or have in his custody a defective document that purports to give him title to the property;
B. Occupy the property in a way that broadcasts his presence to the world at large (for example, erecting a structure or fence);
C. Maintain his occupancy on the property for a minimum of five years; and
D. Timely pay all property taxes assessed against the property for a minimum of five years.
Adverse possession situations are rare in urban settings primarily due to the tax requirement, but have occasionally arisen. For example, assume that Homeowner A knowingly builds a guest cottage behind his home so that the cottage sits entirely on Homeowner B’s lot. Homeowner B fails to notice the invasion. Homeowner A rents out the main house, moves into the cottage, and makes all necessary tax payments assessed against it. Time is now running on an adverse possession claim against Homeowner B. If Homeowner B then sells his property to Buyer C, the adverse possession problem falls to Buyer C.
2. Prescriptive Easement
When someone secures a prescriptive easement against a property, that person acquires the right to use the property in a particular manner, but does not acquire title to the property. Essentially, a prescriptive easement is a legally sanctioned trespass. To acquire a prescriptive easement, one must:
A. Use the subject land continuously, in a particular manner, for a five-year period without the permission of the land’s owner; and
B. Ensure that this unauthorized use is visible to the owner.
Using the hillside town of Portola Valley as an example, let’s assume that upslope Neighbor A intentionally diverts rain runoff away to drain across downslope Neighbor B’s land. Every winter, Neighbor B complains about the runoff to Neighbor A, but takes no further action. After five years, Neighbor A has completed the steps necessary for securing a prescriptive drainage easement across Neighbor B’s land. A subsequent buyer of Neighbor B’s land inherits this problem.
Because there is no requirement that the encroaching party pays the property tax, this is a much more likely problem for a poorly advised buyer. Fortunately, there are steps buyers can take to protect themselves. Prior to making any offer on a listed property, buyers should carefully review the listed exceptions contained in the preliminary title report prepared for the property. If a prescriptive easement or adverse possession claim has been reduced to a judgment and record against the property, this should appear in the exceptions. Buyers should also seek expert advice regarding any exceptions they do not understand, and take their time when inspecting a listed property, looking closely at the property boundaries and for anything traversing the property. If something seems off, it should be examined further. Finally, buyers can protect themselves from future adverse possession or prescriptive easement claims by purchasing title insurance; however, this may not be enough.
First, not all types of title policies provide adequate protection in the event of an adverse possession claim. Second, and significantly, even when covered, title companies often challenge these claims arguing the buyer did not take adequate steps to investigate the property and identify evidence of an encroaching use. In other words, the title company may argue that the buyers and/or their agent did not inspect the property to make sure that no one else was using the land (like, for example, signs of a foot path leading across the property to a neighbor’s land).
Given the risk that a buyer could buy a home encumbered by another person’s rights, it is vital that buyer agents fully understand the rules and the signs for which they should remain cognizant. If an agent appears unfamiliar with the nuances of these rules, then buyers should ask to meet with the brokerage’s attorney, or they should hire their own counsel to advise them on these important issues.
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