In today’s “go-go” California real estate market, and especially in Silicon Valley, the idea that a property owner’s rights could possibly be damaged by “squatters” interfering with the orderly leasing and use of their holdings seems absurd. Even in these rarified times, however, “squatters” can wreak havoc on income property, and their impact can be difficult to remedy once they have established a claim of right.
The concept of acquiring rights in real property by using that property without the permission of the titleholder has a long and contentious history in our legal tradition. On one hand, the right of adverse possession, known colloquially as squatting, has historically been recognized, among other reasons, to help ensure that real property does not lie fallow and is instead used productively; such activities were even encouraged by the federal government with the Homestead Act of 1862 to promote westward expansion. On the other hand, some critics contend that adverse possession encourages environmental damage by allowing overdevelopment without appropriate controls. Either way, adverse possession or squatting can result in the creation of unintended legal rights that can cause serious problems for property owners.
Dramatic increase in squatters
In California, particularly after the subprime mortgage crisis, lenders observed a dramatic increase in squatting in foreclosed homes. Because squatters can acquire legal rights of possession and ownership in California under both state and local law by engaging in certain activities, the removal of squatters, once they have established themselves, can become a time consuming and expensive process. Among the many tactics used by squatters to assert claims of right are to allege an implied contract with the titleholder, to pay rent for a period of time, to pay taxes on the property, and to make improvements to the property. In these cases, state and local law must be consulted to determine what rights squatters have acquired and what means must be used to remove them.
Because they have no equity interest in or formal claim to the property in question, squatters, despite their nonthreatening label, can frequently cause real damage to property, even while engaging in those activities that may establish a claim of right. Besides causing physical damage to property, squatters can also have a substantial negative impact on the normal process of renting or selling real estate, as surprisingly demonstrated in this video.
I have written previously about using caution when offering property for short-term rental on “sharing” websites like Airbnb. A recent incident in San Francisco provides a striking and egregious illustration of how these potentially lucrative arrangements can turn sour. In that case, the owner rented her vacation condo for six weeks to two people who found her rental on Airbnb. The renters paid the owner for four weeks, but then refused to make further payments or vacate. Having stayed longer than thirty days, those renters became entitled to tenants’ rights under California law and local ordinances. As a result, the owner was forced to go to court to have them removed.
How can you protect these assets
If you own or manage rental property, how can you protect these assets from the risk of squatters? Listed below are some ideas you may find useful.
First, study your local laws and ordinances. Here are some questions you should answer before undertaking ownership or management:
- After what length of occupancy does a person acquire the legal right to possession (e., when are you required to follow due process rather than forcibly remove someone)?
- Does local law make a distinction between different types of tenants (g., master tenant, subtenant, etc.)? If so, how do their rights vary?
- If you are not the owner of the property, but rather a renter who is subletting, does this affect your rights?
- If you are a renter, what does your lease say about subletting?
- If necessary, when can the eviction process begin?
Second, you should contact the police when you become aware of possible squatters. The police will investigate the facts and circumstances and determine whether arrest is warranted because a criminal trespass has occurred, or whether it is a civil matter for the courts to resolve because the squatters have established legal rights of possession. It is unlikely that the facts will clearly establish that the squatters are merely trespassing and have no possessory rights, and thus almost certain that the police will find that the situation is a civil matter and take no action to remove the squatters. However, the police will file a report that will be useful in any civil action that you may bring to remove the squatters.
Third, protecting the property (particularly a vacant one) with cameras and good locks can save you from headaches later.
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