Realtor® Alert: Understanding Adverse Possession

teacherIf you have never been involved in a boundary dispute you’ve been fortunate.  Over the years, I’ve seen many, and the take-away is this: The principle of adverse possession, which is a well-established doctrine of the Common Law[1], can make enemies of neighbors. I’ve seen disputants spend more money fighting each other over a sliver of land than the land is actually worth.  “It’s the principle.”

Summary of the Common Law of Adverse Possession. Until 1989, Oregon was a Common Law adverse possession state. This means that it was a creature of Oregon appellate case law developed over the years.  Under the Common Law, a person seeking to secure title to property owned by another would have to show, by “clear and convincing evidence”[2] that their use of the property was: (a) Actual, (b) Open and Notorious, (c) Exclusive, (d) Hostile, and (e) Continuous for a 10-year period.

A.           Actual Possession. A person claiming actual adverse possession must prove that they possessed the land in dispute as would an ordinary owner of the same type of land, taking into account the uses for which the land is suitable.  The way in which an ordinary owner would use the land varies with the type of land. Generally residential land must be used the way an ordinary homeowner would use the land, while farm and timber land may require a great deal more inquiry given the sometimes intermittent nature of pasturing animals or logging timber.

Generally the possession granted by the court will be limited by the boundaries of the land actually occupied, but there are special exceptions that will not be dealt with in this article.

B.           Open & Notorious. These elements are always considered together and have a consistent definition in common law. Citing one Oregon case, a claimants’ use of a subject property is open and notorious if it is “of such a character as to afford the owner the means of knowing it, and of the claim.” The specific amount of activity that satisfies the requirement of open and notorious is not quite clear, and varies from case to case.  It is for this reason that adverse possession cases may end up in court – they are very “fact-specific.” The party claiming the land must at least do enough to put the community on notice, such that an owner would understand that someone else is making such use of the property that the owner would have legal remedy against it.  In other words, the adverse possessor cannot act in secret.

C.           Exclusive Possession. Exclusivity in adverse possession does not necessarily mean that the claimant prohibits any other person from using the property – but it does presuppose that the adverse possessor gives or withholds consent.  In other words, one cannot be an adverse possessor if others, say the neighbor who holds title to the land, regularly uses it themselves and does so without seeking consent.  Similar to “actual” use, the idea of exclusivity changes with the type of land in dispute.

D.           Hostile. Hostility is perhaps the most difficult element to prove in adverse possession. One Oregon case has ruled that “‘hostile’ means that the claimant possessed the property intending to be its owner and not in subordination to the true owner.”  A conscious doubt as to one’s ownership can defeat an adverse possession claim. There must be an intention to hold the property as against the entire world.

Though traditionally, hostility required intent on the behalf of the claimant to hold a piece of property as their own, under the common law the courts also recognized that the intent to hold that property could arise out of a simple mistake.

E.            Continuous Possession.  The final element in common law adverse possession is continuity over the 10-year vesting period.  If all of the elements (actual, open, notorious, exclusive, hostile and continuous) are met over the 10-year period, title by adverse possession has “vested.”  Once vested, however, there is no “event” that occurs on the public record to inform the world that the adverse possessor is now the legal owner.  That is a task left to the court system; a judge’s ruling is necessary, and once recorded on the public record, it is notice to the world that title to the property now resides in another.

Thus, under the common law, a bad guy might finish first.  This was because the adverse possessor could have bad motives, e.g. possessing another’s land with full knowledge that he didn’t own it.  Acting as if one owned it, and meeting all of the other elements, could vest title to the bad guy after the lapse of ten years.

Statutory Adverse Possession in Oregon.  In 1989, Oregon codified the elements of adverse possession; i.e. the Oregon Legislature wrote all of the common law elements into a statute, now found in ORS 105.620.  Most of the statutory law of adverse possession followed the common law elements.  However, a significant new element was introduced – the requirement that one had to have an “honest belief” in their ownership.  In other words, the person claiming title by adverse possession must have had a good faith belief they are the true owner.[3]

The statute clarifies that a person may acquire fee simple title to real property by adverse possession only if:

  • The person (and their predecessors in interest[4]) of the person have maintained actual, open, notorious, exclusive, hostile and continuous possession of the property for a period of 10 years;
  • At the time the person claiming by adverse possession (or the person’s predecessors in interest), first entered into possession of the property, the person entering into possession had the honest belief that the person was the actual owner of the property and that belief:
    • By the person (and the person’s predecessor in interest), continued throughout the vesting period;
    • Had an objective basis; and
    • Was reasonable under the particular circumstances; and
    •  The person proves each of the elements set out in this section by clear and convincing evidence. (Emphasis added.)

The Take-Away for Realtors®.  Clearly, brokers are not responsible for vetting this issue.  They don’t have to read surveys, verify the location of survey pins, or cross-examine an owner to learn why he or she placed a fence where they did.  However, vigilance is always a good thing.  For example, most lot lines don’t “jog” – they run in straight lines.  When lines of possession, say to a fence or row of bushes, seem to take a peculiar turn, it may be worthwhile to mention it to your buyer-client for further inquiry. If you’re listing such a property, the issue might be raised with your seller.  Since Portland Maps is such a ubiquitous source of good information about residential property, from property tax information to building permits, a quick look at the tax assessor maps might be in order from time to time.

Here is what the Oregon Seller Property Disclosure Statement asks:

  • Are there any encroachments, boundary agreements, boundary disputes or recent boundary changes?
  • Is there a boundary survey for the property?

In addition, a few years ago, we added the following statement to the Seller Representation section of the OREF sale agreement forms:

  • Seller knows of no material discrepancies between visible lines of possession and use (such as existing fences, hedges, landscaping, structures, driveways, and other such improvements) currently existing on the Property offered for sale and the legal description of the Property. (Emphasis added.)

The final point to be made is that title insurance does not insure buyers against a loss of their property due to the adverse possession of a neighbor.  The reason is that it is a standard exception in all owner’s policies of title insurance that the company will not insure against matters “that a correct survey would disclose.”  Secondly, and equally important, is the fact that title insurance only insures against defects appearing on the public record.  Your title officer does not go out to the property and survey it – he or she just checks the public record.  Since adverse possession only manifests itself when one neighbor sues the other and gets a judgment affecting the legal title, this issue is not something that a title insurance policy can be expected to cover.

Conclusion.  As noted above, vigilance is a good thing – not necessarily because adverse possession is a big risk management problem for the Realtor® industry[5] – but simply because borders and boundaries are important – and being aware of the issue may prove helpful to your clients in the future.

[1] The Common Law is the law developed over time through appellate court precedent.  It’s why appellate court judges issue written opinions, i.e. for future courts to follow.  The process lends predictability to the law – at least until lawyers begin disagreeing about the meaning of a particular precedent when applied to the facts  of their case.

[2] Clear and convincing evidence is a much higher burden than the normal “preponderance of the evidence” in most civil cases.  The proof must be more probable than not.  This is not an unreasonable burden to place on an adverse possessor when it comes to taking legal title to the land of another.

[3] The effect of the law means that if one was able to vest title to land by adverse possession before 1990, their honest belief didn’t matter.  But an honest belief was required to vest title by adverse possession in 1990 and thereafter.

[4] The law permits “tacking,” i.e. one owner with less than a 10-year vesting period may “tack” on to their predecessor’s time, assuming both continuously met all of the legal elements.

[5] In my experience, I have never seen litigation brought against a broker relating to an undiscovered adverse possession claim. It simply is not something that they are expected to be experts in.