LEGAL CORNER: Recent Court Decision and a Review of Adverse Possession

While many real estate professionals are familiar with the concept of adverse possession, few consider the issues that can arise when selling and purchasing real property. The concept has been around for ages. In its basic form, the concept allows a person who takes possession of real property, makes improvements to it, possesses it in a public manner, and continues to do so for an extended period of time (10 years or more) continuously, to acquire an ownership interest in the real property.

Adverse possession may also be used to establish ownership rights to a specific tract of land even where a prescriptive or actual easement exists. In a recent decision, CJA Realty Holdings, LP v 14 Phila St. LLC, the Appellate Division, Third Department, deals with this very issue and whether an individual could establish adverse possession rights to a portion of the adjoining owner’s property where there existed an easement for egress and ingress. The case provides a useful review of the doctrine of adverse possession as well as the changes to law that occurred in 2008.

The Current Adverse Possession Law Enacted in 2008

In 2008, New York enacted critical changes to the adverse possession law under Article 5 of the Real Property Actions & Proceedings Law (RPAPL) [see https://bit.ly/3edAY0I]. Section 501 of RPAPL provides key definitions. Under Section 501(1) an “adverse possessor” is defined as a person or entity who or that “…occupies real property of another person or entity with or without knowledge of the other’s superior ownership rights, in a manner that would give the owner a cause of action for ejectment.” This means that an adverse possessor is an individual or entity against whom or which an owner could bring an action to evict. If the owner brings an action within the 10-year period from the point at which the adverse possession commenced, then an owner would be able to evict and remove the adverse possessor from the property.

Under Section 501(2) an adverse possessor will gain title to the real property in question upon the expiration of the 10-year statute of limitations “…provided that the occupancy…has been adverse, under claim of right, open and notorious, continuous, exclusive, and actual.” All of the aforementioned elements must be established before an adverse possessor’s ownership rights will accrue. One change from the previous law was that the 2008 amendment included a definition of “claim of right.”

A Review of the Basic Elements of Adverse Possession

As noted above, in order to claim title to the property, the adverse possessor must establish the following elements: (1) claim of right, (2) possession must be open and notorious, (3) exclusive, (4) continuous, (5) actual and (6) hostile.

Claim of Right— Under Section 501(3) a “claim of right” is defined as “…a reasonable basis for the belief that the property belongs to the adverse possessor or property owner, as the case may be.” An adverse possessor must actually believe or be convinced that the adverse possessor has a legal right to the land being occupied. However, the “claim of right” element is not required if the owner of the real property throughout the 10-year period cannot be reasonably ascertained in the records of the county where the property is located.

Open and Notorious—An adverse possessor’s possession of the real property must be “open and notorious.” This basically means that possession must be obvious and noticeable. It cannot be of a hidden or unknown nature. For example, if there is a use of hidden underground utilities, which are unknown to the owner, there would be no valid adverse possession claim.

Exclusive Use—The adverse possessor must have exclusive use, control and occupancy over the property in question. A key component of the “exclusive” element is that the adverse possessor must never acknowledge at any time during the 10-year period that the property belongs to another person nor shall the adverse possessor allow the owner or any other person or entity to use and occupy the property. Once this occurs, the adverse possession claim will fail.

Hostile—The “hostile” element is similar to other elements and is usually found to exist if all of the other elements above exist. It basically requires that use of the property must be without the consent or permission of the owner. If at any time during the 10-year period permission is sought to occupy, use or improve the property, that would immediately terminate a claim of adverse possession.

Continuous—The adverse possessor must continuously occupy the property for the requisite 10-year period. The continuous element does not require that the person who initiated the adverse possession and occupancy of the property be the  same person who continues the possession for the 10-year period. If another person or entity, for example, a purchaser acquires  the adverse possessor’s property and continues to use that portion of the property, which was being adversely possessed for the 10-year period, the continuous element would be deemed satisfied, provided, however, that the property in question was part of that transaction. Continuous does not mean that the acts of adverse possession continue on a constant basis, but they must be repeated acts that are consistent with a claim of right and ownership.

Key Changes from the Previous Adverse Possession Law

In 2008, three notable changes were made to the adverse possession law, which had been in effect since 1962. The law added the definition of “claim of right” to Section 501(3) which is defined as “a reasonable basis for the belief that the property belongs to the adverse possessor or property owner….” This change adds a reasonableness standard to the law.

Another important change had to do with the requirements of the type of possession engaged in by the adverse possessor. Previously, the law stated that “land is deemed to have been possessed and occupied…[w]here it has been usually cultivated or improved.” The prior standard was a more direct and objective one, which made it easier to establish adverse possession.

The revised Section 522 reads as follows: “land is deemed to have been possessed and occupied…[w]here there have been acts sufficiently open to put a reasonably diligent owner on notice.” An adverse possessor’s actions must be more overt, and those actions must be able to “put a reasonably diligent owner on notice” of the adverse possession taking place. The changes were enacted to protect against those who attempted to engage in “adverse possession” by stealth methods or in bad faith, making it more difficult to establish ownership rights through adverse possession.

Lastly, the new changes provide that minor nonstructural encroachments and maintenance activities are permissive and non-adverse. Section 543(1) provides that “…the existence of de minimus non-structural encroachments including, but not limited to, fences, hedges, shrubbery, plantings, sheds and non-structural walls, shall be deemed to be permissive and non-adverse.” Further, Section 543(2) provides that “the acts of lawn mowing or similar maintenance across the boundary line of an adjoining landowner’s property shall be deemed permissive and non-adverse.” Previously, there was always a fear that these minor issues could become an adverse possession and title issue.

CJA Realty Holdings, LP v 14 Phila St. LLC

In CJA Realty, the plaintiff and defendant (14 Phila St. LLC) owned adjoining real property. Another defendant owned and operated a restaurant and leased space from 14 Phila St. LLC. In 2017, the plaintiff sued the defendants seeking to enforce its right to use a 20-foot-wide easement for vehicular ingress and egress, which burdened the defendants’ property. The plaintiff sought to have the defendants remove all structures from the purported easement area and keep the area free from any obstructions. The defendants counterclaimed against plaintiff and alleged that “a portion of the easement—namely, that portion which is enclosed by a fence and used for outdoor seating and dining—had been extinguished by adverse possession.” Plaintiff replied to the counterclaims and discovery ensued. The lower court granted the plaintiff’s motion for summary judgment and denied the defendants’ counterclaim. The defendants appealed the trial court’s decision to the Appellate Division.

The Appellate Division explained that “an easement created by grant may be extinguished by adverse possession if the party seeking to extinguish the easement established, by clear and convincing evidence, that its use of the easement was hostile and under a claim of right, open and notorious, actual, exclusive and continuous for a period of 10 years.” Therefore, the defendants must, by clear and convincing evidence (not merely a preponderance of the evidence), which is a much higher evidentiary standard, establish that all of the elements of adverse possession exist.

The court further explained that “a presumption that the use was hostile generally arises once all other elements of the adverse possession claim are established, thereby shifting the burden to the opposing party to demonstrate that the use was permissive.” Therefore, once all of the elements have been established by the defendants, the burden shifts to the opposing party to show that the defendants’ actions were permissive, which would defeat the “hostile” element. In CJA Realty, the defendants did present evidence that one of their predecessors-in-interest had fenced in the area in question in 1995. To counter, the plaintiff also submitted evidence that the defendants’ actions were made with the consent of the prior owners.

The Appellate Division, however, held that while the defendants “made a prima facie showing that their predecessors’ use of the disputed portion of the easement was actual, open, notorious, exclusive and continuous for the prescriptive period, defendants’ own submissions raise[d] a question of fact as to whether use of the easement for enclosed outdoor seating and dining was permissive and under a claim of right.”

The Appellate Division further held that the plaintiff’s evidence presented at the lower court level relating to the issue of permissiveness was also not sufficient to warrant a dismissal of the defendants’ counterclaim at the summary judgment stage. In essence, the court decided that the parties had to go back to trial regarding these issues. The area of adverse possession is heavily fact-dependent. Before a court decides whether or not to award an adverse possessor an ownership right to all or part of a parcel of real property, it will require that all of the facts and evidence be presented to establish whether all of the elements of adverse possession exist.

A Practical Guide for Dealing With Potential Adverse Possession Issues

Almost every real estate transaction involves a potential adverse possession claim. As is evident in CJA Realty, the issue would have clearly become a roadblock if the defendant chose to sell the property. Any purchaser would have likely included in the contract of sale the right to use the enclosed area for outdoor dining. The placement of fences and structures on an adjoining property are the most common issues that arise in a real estate transaction. While the current law excludes minor or “de minimis” encroachments, such as fences, shrubs, non-structural walls, and the like, often times a fence or enclosure encroaches upon or cuts off access to a substantial portion of a property.

Real estate agents and real estate attorneys should always request or attempt to obtain copies of surveys to properties early on. If fences, walls, or other potential encroachments exist, a survey can be useful in determining any potential issues. Sellers will usually have a survey from their original purchase of the property. Surveys may also be found at the building department of the town in which the property is located.

Additionally, when real estate agents visit the property, it is useful to make notes of any structures or improvements, as well as any walkways or paths that extend beyond the property, as these could be evidence of the presence of a prescriptive (non-written) or express easement, and any structures that exist at the property. Often surveys do not include dirt pathways or walkways and making a note of these items and advising the buyer and the buyer’s attorney could go a long way in helping protect the buyer.

In the event a survey cannot be located prior to signing the contract of sale, the purchaser’s attorney should include language in a rider that provides the purchaser with the right to obtain a survey and to cancel, if any issues arise should the seller not be able or willing to clear any such issues. Since the enactment of the 2008 changes to the adverse possession law, it is customary for purchaser’s attorneys to include the word “minor” wherever the contract of sale refers to permitted exceptions and/or encroachments which a purchaser must agree to accept and to include language that specifically defines “minor” as any encroachment that is 12 inches or less.

It is also recommended, if possible, that an affirmative obligation of the seller to obtain a boundary line agreement be included in any purchaser rider. The boundary line agreement will normally contain acknowledgements that the adjoining property owner makes no adverse possession claim or claim of right to any portion of the property and that said use and occupancy is permissive. While this may be difficult to obtain or include in a rider, if the seller agrees and is successful in having the adjoining property owner deliver a boundary line agreement or acknowledgment, the buyer may proceed with the closing even where a substantial portion of the property may be blocked off or fenced in because the title company will usually insure ownership rights of the purchaser.

Survey, encroachment, and adverse possession are basic “title issues” that come up often, and if the seller is unable to deliver good, marketable and insurable title to property free from these issues, a purchaser should have a right to terminate the transaction and receive a refund of the contract deposit. A basic knowledge of these issues goes a long way in protecting the ownership rights of both purchasers and sellers.