Squatters rights may not be your first problem when managing a rental property. After all, property management is exactly about taking care of a property and not enabling unauthorized use.
However, in rental property management, it is good to be prepared for a squatting situation. The way you handle it can literally cost your clients their ownership of an investment property. This would be really bad for any property management company.
What Is a Squatter?
A squatter is someone who uses real estate without owning it or without any legal permission by the owner to do so. It usually happens on neglected land or in dilapidated and abandoned properties in cities. As far as rental property management is concerned, squatters can move in service rooms, parking lots, mother-in-law houses, vacation homes, as well as empty rental properties. Tenants can turn into squatters only after their lease is up and they have no agreement with the landlord to stay longer.
What Are Squatters Rights?
Squatters rights allow squatters to become rightful owners of a property they have illegally settled in if the owner fails to evict them. The owner has to act and claim his/her property rights within the statute of limitations – this is the period allowed by the law. If the owner does not take action and the statute of limitations expires, the squatters can legally try to receive squatters rights or Adverse Possession. However, they usually are asked to prove that a few other requirements are met: that the squatting position of the property is hostile, continuous, visible, actual, and exclusive.
For example, it is necessary that the squatter has not shared possession with anyone else during the whole time of occupancy and has lived there openly, not secretly. All requirements make it hard for squatters rights to be obtained. It is important to remember that squatters rights are not part of the rental laws. This means you as a property manager are not obliged to provide squatters with the same property management services as paying tenants such as maintenance or access to laundry facilities.
Related: Tips for Rental Property Maintenance During the Coronavirus
Why Do Squatters Have Rights?
The law tradition of squatters rights comes from England. There, it was common to own huge chunks of land and boundary lines could get blurred in transactions. Sometimes it was hard to tell where one real estate property ended and another started so squatting was often unintentional. Other times, the area was just too big for the owner to use it fully and parts of it went neglected. To prevent the waste of land, squatters rights were adopted to stimulate owners to take good care of their land. Otherwise, someone else willing to do it could take possession of the land by squatting.
Nowadays, squatters rights still exist as barriers to long-lost heirs coming forward and claiming ownership after centuries of the property being neglected. Such laws seek to stimulate proper ownership and maintenance.
Which States Have Squatters Rights?
All 50 states have laws addressing squatters rights in place. Here are some of the states with top housing markets, their statute of limitations, and the additional requirements for claiming squatters rights.
California
- 5 years
- Maintaining the property in good condition as an owner would
- Paying property taxes for 5 consecutive years
Florida
- 7 years
- Paying taxes for 7 years or having a Color of Title
- Cultivation, improvement or protection of the property for 7 years
Utah
- 7 years
- Payment of taxes for 7 years or having a Color of Title
- Taking care of the property for 7 years
Texas
- 10 years
- Or 3 years and a document proving ownership
- Or 5 years and property maintenance, tax-paying and a document proving ownership
New York
- 10 years
- Color of Title
Illinois
- 20 years
- A Color of Title or 7 years and paid taxes for this period
Ohio
- 21 years
How to Deal with Squatters as a Property Manager
Squatters can’t easily move in well-managed rental properties and buildings, and this should be a relief for the good property manager. The risk is higher for foreclosed homes and abandoned houses which typically are not under rental property management. Regular inspections and professional record-keeping of tenants are good practices to follow to minimize the risk for the properties you manage.
However, if somehow it happens, keep in mind that only the property owner can take legal action against squatters. This puts you, as the property manager, in a delicate position.
Things you cannot do as a property manager:
- force the squatters out
- try to scare them into leaving in any way
- change the locks
- cut utilities.
It is best to report trespassing to the police and have them present if you have to communicate with the squatters in any way. The police report is also official documentation proving the rental property owner has taken action for the trespassing within the statutory limitations period. This is crucial evidence against squatters rights in court. And by all means, inform your property management clients immediately if you suspect anything. This means you do not want to hide anything concerning the property from them, helping to establish and maintain a trusting relationship.
Related: 9 Reasons Property Management Companies Fail (And How to Avoid Them)
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Things you can do:
- Add an extra level of entrance security to the building so squatters will have to break something to get in. This is a criminal offense and will most likely keep them out legally without an eviction.
- If possible, check the names utility bills are tied to regularly and compare them to tenant records. This way you can catch someone planning to take squatting rights or illegally subletting to others who might.
Related: A Property Manager’s Guide to Subletting
Special cases of squatting and what to do about them
- If you find squatters in a vacant rental unit under shelter-in-place orders during the coronavirus crisis, you cannot evict them. It is best that the owner gives them temporary permission to stay, thus taking away the opportunity to claim squatters rights later. If they have any permission from the owner, they cannot seek adverse possession.
- If you have been managing a residential property that is now up for foreclosure, warn the owner about squatters. Since foreclosed homes sit vacant for quite a long time and neighbors are used to seeing people living there, squatters can live there for quite some time undisturbed.
- If there are squatters in the property next door to one you are managing on behalf of a client, it is also in your interest to act against it. Abandoned houses make the whole neighborhood look run-down and drive property prices down. Squatters make things even worse as many tenants may feel threatened or even cheated. Your property management clients will definitely want squatters in the area removed in order to protect their rental income. They might be able to contact the owners for help.
In Conclusion
Property managers should prevent squatting with proper maintenance, tenant records, and regular inspections. If it happens despite all measures, they should inform the owners and the police in order to start an action against squatting rights.