Adverse Possession, is it a Viable Acquisition Strategy?

I heard recently a real estate “guru” talking about using “Adverse Possession” as an off-market acquisition strategy. As a real estate investor, I understand what adverse possession is but never looked at it as a viable strategy.  Let’s explore the concept together.

Adverse possession is a legal process that allows title (i.e. ownership) to be taken by a trespasser.

Adverse possession comes from a belief that property should be used, and “if the rightful owner is not using the property and makes no claim to it the law has provided a means by which a possessor’s interest will be defended and make him/her feel confident in making effective use of the land.” says Scott Smith, Attorney.

There are several requirements for adverse possession that are the same across state lines:

  • Hostile –  The trespasser must be making use of the property without permission from the owner. The definition can vary from state to state, but the most common one defines “hostile” as the mere occupation of the land. The trespasser doesn’t even need to know that the land is titled to someone else.

  • Actual – The trespasser must be a physical occupant and treat the property as if it is their own. This is done by maintaining and making improvements to the property.

  • Open and notorious – It must obvious to all onlookers, including the property owner, that the trespasser is a resident of the property.

  • Exclusive, uninterrupted and continuous – The trespasser must occupy the property without interruption and may not share possession with anyone else.

Dhill

According to Nolo,” the time that the trespasser must have occupied the land varies by state. In some states, the trespasser must have paid taxes on the property during this time. Other states don’t require payment of property taxes, but will apply a shorter time requirement for land occupation if the trespasser has paid taxes. And some states don’t mention tax payments at all in their adverse possession statutes.”

Time requirements by state:

State Time Requirement (in years)
AL 10 (deed or taxes)
AK 10, 7 (deed)
AZ 10, 5 (deed, taxes if city lot), 3 (deed, taxes)
AR 7 (deed, taxes)
CA 5 (taxes)
CO 18, 7 (deed, taxes)
CT, DC, KS, MI, OK, VT, VA 15
DE, HI, ME, MD, MA, NH 20
FL 7 (deed or taxes)
GA, NC 20, 7 (deed)
ID 20 (taxes)
IL 20, 7 (deed or taxes)
IN 10 (taxes)
IA, MS, MO, NE, NY, OR, RI, SC, WV, WY 10
KY 15, 7 (deed)
LA 30, 10 (deed)
MN 15 (taxes)
MT 5 (taxes)
NV 15 (taxes), 5 (deed, taxes)
NJ 30
NM 10 (deed)
ND 20, 10 (deed, taxes)
OH, PA 21
SD 20, 10 (taxes, deed)
TN 7 (deed)
TX 10, 5 (deed, taxes)
UT 7 (taxes)
WA 10, 7 (deed or taxes)
WI 20, 10 (deed), 7 (deed, taxes)

 

As an investor, instead of going out looking for property to take through adverse possession (this could take a lot of time and leg work) we can look to purchase a defective chain of title from someone who has started the process of adverse possession.  This would require the investor to finish all the legal work so that the title is transferable.  This isn’t a strategy that I would recommend trying to use consistently, but it’s another tool in your tool box.

Learn to Trade Now

This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms