Tuesday, November 9, 2010

Arcane Property Law Concepts and the Mortgage Crisis

Today's New York Times has an article on how the very old, very arcane property law concept of adverse possession is popping up in our foreclosure crisis, 

Save Florida Homes Inc. and its owner, Mark Guerette, have found foreclosed homes for several needy families here in Broward County, and his tenants could not be more pleased. Fabian Ferguson, his wife and two children now live a two-bedroom home they have transformed from damaged and abandoned to full and cozy. There is just one problem: Mr. Guerette is not the owner. Yet. In a sign of the odd ingenuity that has grown from the real estate collapse, he is banking on an 1869 Florida statute that says the bundle of properties he has seized will be his if the owners do not claim them within seven years...

Legal scholars say the concept is old — rooted in Renaissance England, when agricultural land would sometimes go fallow, left untended by long-lost heirs. But it is also common. All 50 states allow for so-called adverse possession, with the time to forge a kind of common-law marriage with property varying from a few years (in most states) to several decades (in New Jersey)...

It is not clear how many people are testing the idea, but lawyers say that do-it-yourself possession cases have been popping up all over the country — and, they note, these self-proclaimed owners play an odd role in a real-estate mess that never seems to end.
Pay attention in your Property Law class all of you 1L's out there.

via Kay at Balloon Juice


Andrew Oh-Willeke said...

Adverse possesion is hardly arcane. It comes up in relatively ordinary real estate practice with some regularity and backstops the title standards used in every commercial real estate closing.

The adverse possession statute in Colorado allows adverse possession based on seven years payment of property taxes and "color of title," a provision that would be hard for squatters to avail themselves of.

Realistically, any company that takes seven years trying to foreclose deserves it.

Another faster approach is to buy property tax liens on apparently abandoned property and convert them into ownership. This is hard to do in places where real estate is worth anything, but is an approach developed by ACORN in Detroit.

Most residents of properties in foreclosure simply stay until they are evicted, getting rent free real estate in the process for many months, something that works in almost every state and also makes squatting not very viable.

T.R. Donoghue said...

I admittedly find almost all property law to be arcane. ;)