Addverse Possess the Foreclosure Crisis Away

>> Friday, April 10, 2009

A side effect of the massive foreclosure crisis is that a great many number of homes sit vacant waiting to be vandalized, stripped of any and all valuable resources and generally made worthless. The true owners of these properties are sometimes generally unknown or not interested in being responsible for them. In some cases the banks who own the property are leaving the former owners in possession because its too much money or hassle to sell them. The banks are walking away from property. With all of these owners giving up on property i propose that changes be made to adverse possession laws in order to facilitate the renovation of these abandoned properties and get the title in the hands of people who want them.

I thought about this as a means to dealing with some of the housing crisis after reading this article linked via john cole.

When the woman who calls herself Queen Omega moved into a three-bedroom house here last December, she introduced herself to the neighbors, signed contracts for electricity and water and ordered an Internet connection.

What she did not tell anyone was that she had no legal right to be in the home.

Ms. Omega, 48, is one of the beneficiaries of the foreclosure crisis. Through a small advocacy group of local volunteers called Take Back the Land, she moved from a friend’s couch into a newly empty house that sold just a few years ago for more than $400,000.

Michael Stoops, executive director of the National Coalition for the Homeless, said about a dozen advocacy groups around the country were actively moving homeless people into vacant homes — some working in secret, others, like Take Back the Land, operating openly.

In addition to squatting, some advocacy groups have organized civil disobedience actions in which borrowers or renters refuse to leave homes after foreclosure.

Cole was actually upset that these people were moving into these properties.

These people aren’t just “squatting” or engaging in “civil disobedience” or striking a blow against tyranny or whatever the hell else you want to call it. They are stealing, they are trespassing, and they are breaking the damned law. And while the NY times may think it is glamorous or sexy or a real power to the people moment, they should be clear about what is going on here and what a mess this sort of behavior causes for the authorities. If they can’t figure out why this is problematic, maybe they should read their own damned NY Times magazine about the problems squatters and illegals and looters cause in Cleveland. Give Tom Brancatelli a call and ask what he thinks about this.

Being a good law student the first thing i thought of when i heard people were moving into property and acting as if they owned it was a property law concept called "adverse possession". For those unfamiliar with the term adverse possession is when you occupy the property of another as if its yours, with out their permission, continuously for a number of years as determined by statute. The length of this time varies from state to state. For an example of an adverse possession statute scheme see here.

In my mind the biggest obstacle to using adverse possession as a means to fill the empty houses or to give people a chance to keep their homes is the time requirement. In california it takes five (5) years of possession before you can make your claim and try to gain marketable title to the property. During that time you must also pay property taxes, something i support as part of the requirement. It is less likely that you can convince a responsible party to take over abandoned property, invest in it to the point it becomes valuable, if that investment could be taken back by the bank or other entity in four(4) years when the market has recovered somewhat. I propose changing the time to eighteen (18)months.

If you believe that this period is too short and would lead to people essentially stealing land that others are being responsible for this change could be made in a way to be tailored for the housing crisis. Make this a statute that is available only after foreclosure of a property when such property has been uninhabited for 3 months. Other arrangements could be made for those who wish to try and stay in the house.

The reason i am advocating for an increased incentivization for adverse possession is that the purpose of adverse possession statutes is to deal with exactly the problems we have now, underutilized land.

Natural Rights:

Adverse possession has somewhat of a "labor" basis. It allows a person to acquire property interests through the productive use of land that has fallen into disuse. The doctrine can be viewed as dealing with circumstances where previously owned land reverts to the commons through non-use (and a failure to monitor) and may be claimed by another who applies his or her labor to remove the land from its natural state.

Utilitarian Theory:

The utilitarian justification has two branches. First, adverse possession rewards productive use of land over extended non-use. This justification is not strictly utilitarian, for it does not always (or even usually) give title to more productive users --- only when the true owner is making no use (the market will help ensure that less productive uses are transferred to more productive uses, but the market often cannot work when the true owner is unaware of his ownership). It is true, as the question suggests, that the doctrine considers non-use of land to be wasteful, but the tax requirement in most western states reduces the risk that fallow lands will be subject to adverse possession. Second, the doctrine is utilitarian in the sense that it makes land more marketable---reducing stale claims and reducing litigation (and the risk of litigation).

Those of you who read the NYT article on the lady who took set up shop in that house will realize that she isnt planning on staying long term. However she might change her mind if she knew that the property could be hers in a year and a half if she manages to be a decent homeowner. Even if she leaves, someone else could "tack" on to her possession and then claim ownership. Adverse possession seems like a good way to deal with the problem of massive foreclosures and get the housing market back on a level footing. Without so many foreclosures on the market prices will not be as depressed and fewer people will be underwater.

Adverse Possession is one an old and well known legal doctrine and should provide a useful tool in this crisis. In fact i might go get a house right now...


Anonymous May 26, 2009 at 5:10 AM  


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Warm Regards Team

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