For me, one of the most interesting concepts of real property law is adverse possession – the right to acquire another person’s property through trespass. This topic is interesting because it is completely legal, fully established, and very counter-intuitive. Adverse possession comes from our British ancestry. It was originally a way to ensure that the King’s land was always put to its greatest use. However, in modern times, it has become more of a legal loophole than anything else. As such, the California State Assembly voted unanimously last Spring to change the rules for acquiring title to California land by adverse possession. These rules are effective this year and I feel it important to relay the information to all real estate professionals.

Adverse Possession

Adverse possession is “the acquisition of title to another person’s real property as a result of holding that property in a manner that conflicts with the true owner’s rights.” Essentially, adverse possession is a form of “laches,” the basic legal concept that people lose certain claims, defenses, and arguments when they fail to timely assert them. If someone squats on your land and calls it his own for a number of years without your objection, the government will eventually give the squatter legal title to your land. From a policy standpoint, the state supports adverse possession because it places a statute of limitations on title disputes and cures defects in title. This allows property to be efficiently passed from person to person. Otherwise, great grandchildren could theoretically come out of the woodwork every 80 years and claim rights to some stranger’s home simply because of something that happened generations earlier.

It should be noted that adverse possession is different from “prescriptive easements,” or “prescription.” Adverse possession is a way that people earn title to property by squatting on the property long enough. Prescription is a way that people earn easements on the true owner’s property through continuous and uninterrupted use. These two concepts are very similar in that they both give a property interest to a non-owner simply for infringing the true owner’s rights. However, these concepts are governed by very different rules in California, and the legislature’s recent bill only changes the rules for adverse possession.

The Rules for Adverse Possession

Adverse possession is centuries old and it exists in all 50 states. In California, there are 5 main rules. First, the adverse possessor must claim right or color of title – meaning the possessor must have something in writing that seems to give him or her claim to the property. Often, this is a fraudulent notice or a defective deed. Second, the possessor must actually, openly, and notoriously possess the property. This means that the possessor cannot be secretive. He or she must go to the area, move onto the land, and openly profess to own it. Third, the possession must be adverse to the true owner. This means the owner must not have invited the possession or otherwise leased or granted the possession. Fourth, the possession must be continuous for at least five years. And finally, fifth, California uniquely requires that the possessor pay all assessed property taxes during the five continuous years of possession.

The Problem

In California, most adverse possession claims are perfected at the very end of the five year period when the possessor makes a lump sum payment of all the back taxes due on the property. Basically, an adverse possessor takes open control of a neglected or forgotten rural property, retains a clearly deficient deed, waits five years, and then makes a onetime payment of all the property’s outstanding tax obligations. After, the possessor has a ripe and perfected claim for title by adverse possession.

Some claim that the right of possessors to make a one-time lump sum tax payment defeats the open and notorious element of adverse possession. They feel that it keeps owners of rural land from ever knowing their eminent danger of losing title and it prevents them from having the chance to do something about it. Since adverse possession is a rare occurrence, and its modern use has almost exclusively been restricted to the state’s most rural areas, the legislature has decided that possessors must now pay taxes as they become due and payable so that actual owners have an additional chance to learn about the possession.

The Change – Assembly Bill 1684

In 2011, the fifth element for adverse possession will be clarified so that taxes must be paid “timely” on the subject property. Possessor’s will no longer be able to make a one-time payment and then sue for title as soon as the check clears. Instead, they will be required to pay as soon as each periodic assessment becomes due and payable. This will significantly reduce the already low number of adverse possession claims in California. Possessors will truly have to take hostile possession of the land and act as true owners for five years with no guaranty that their investment of time and energy will result in title (if an owner files a claim before the five year period, the possessor is evicted without recourse).

Some wonder whether this change is truly beneficial. For instance, what about the possessor that wins or purchases a defective deed in good faith, lives openly and hostilely on the land for five years, but misses a few property tax payments over that time? Is that possessor out of luck? And how does this affect the law in general? If the purpose is to make good use of land, how does turning down a tax payment and defending the owner’s neglect and refusal to pay taxes mesh with the purpose for this rule?

Regardless of the implications, this change passed with relative ease and it is not very controversial. It will be implemented this calendar year as an extra protection to our state’s rural land owners. Although we may not deal with adverse possession day to day, this change will certainly cause more than a few questions on the DRE exam to be re-written. Therefore, it’s a good thing for practicing professionals to know about and understand.