Squatting is the unauthorized use of a property. It’s trespassing without the permission of the landowner, and usually over a significant period of time.
If you’re a real estate professional, you may at some point need to sell a property that’s been inhabited by squatters. But, there are risks to consider.
Here are some tips to minimize the risks and sell that property…
Understand What Properties Are Most At Risk
Squatters tend to move into properties that are vacant for a long time. Unoccupied properties owned by out-of-state landlords, holiday homes, or properties not visited regularly by the owners are particularly vulnerable.
Isolated properties, such as farms and industrial properties, are also commonly targeted, because they can be occupied without being visible to nearby neighbors.
Landowners can potentially avoid squatters, if they engage a real estate professional to visit their properties on their behalf on a monthly basis. Taking photographs can be useful to assess the difference between visits, and to spot whether the property has been inhabited by squatters. This can also help to defend against an “adverse possession” claim in which squatters claim ownership of the property.
The Rights of Squatters
Adverse possession laws vary from state to state:
- In California, a squatter who pays tax on a property for 5 years can claim ownership.
- In Colorado, a squatter can claim possession after living in a property for 18 years with a deed, or after living there for seven years if paying property taxes.
Most American states require a squatter to live in a property for 7-20 years before they can claim possession. This “residence” must be hostile (in that it is without permission from the landowner) and continuous. If the squatters move out for a period and then decide to move back in, the clock restarts.
Adverse possession is more common than you may think. In 2008, Steven DeCaprio, then homeless, began squatting in a vacant property in West Oakland, California. After fixing the home and living there for several years, DeCaprio was declared the legal owner under adverse possession laws.
Risk Factors When Selling a Squattered Property
Most squatters trespass because of homelessness and housing need. This is common in places where there is a high level of housing insecurity.
There are four main risk factors to consider when selling a squattered property:
- Risk of property damage
Abandoned properties often already have major maintenance issues, but when squatters live on the premises, the condition of a building can take a turn for the worse. It’s common for squats to be unhygienic spaces. Some become drug havens, while others are simply cluttered with rubbish and vandalized.
- Risk of injury/illness or personal safety concerns
There is a real risk of injury and illness to real estate agents and prospects, if a property is an active squat. Even if the squatters have vacated, the property could have unsanitary conditions and hazards that can cause injury or illness.
If property owners are aware of any squatter activity and want to sell the home, they should take steps to evict the squatters through law enforcement. They must also ensure the property is thoroughly cleaned before real estate professionals, like you, or prospective buyers enter. Failure to do this increases their risk — and your risk as the agent.
What happens if a prospect is injured with a needlestick? Or he/she becomes ill because the property was used previously as a meth lab? Or, what if active squatters cause personal injury because of an unexpected property viewing?
Real estate professionals face lawsuits every day, and you don’t want to be sued by a prospect because of a personal injury sustained during a showing.
- Risk of the property being legally claimed by the squatters
Before selling a property where squatters live or have lived, real estate professionals should be 100% sure the squatters either:
- Have moved out for good, or
- Do not have any claim to the property according to the adverse possession laws in your state.
Can you imagine if you were to sell a property that, in the eyes of the law, was legally owned by squatters and not the owner?
4. Disclosure Responsibilities
Agents need to be aware of your disclosure responsibilities. (Disclosure laws differ in each state, so be sure you’re familiar with laws in your state.) The main purpose is to protect prospective buyers by ensuring they have sufficient information to make informed decisions.
If you know something that can materially affect the desirability, price or decision to purchase a property, you must disclose it.
Property Damage Sustained Before Closing
Let’s say you sell your listing which has a history of squatters. What happens if property damage is sustained before closing?
If the damage is significant, the buyers may have grounds to back out. In some cases, the property seller’s insurance may cover the damage, which may simply delay closing but not stop it altogether.
If it’s minor damage, both parties may negotiate the agreement to cover the damage.For example, the seller may reduce the price to sell the property as is, or they may agree to do the repairs before closing.
Protecting Yourself Against Liability
A real estate Errors and Omissions insurance package is essential for real estate professionals, especially if you’re dealing with properties where squatters live or have lived. To ensure you have the best possible protection, contact the CRES team. With CRES E&O Insurance + ClaimPrevent®, you’ll have extensive coverage for specific-to-real-estate risks, and pre-claim access to legal advice from qualified attorneys. You can also include specific Open House and Showings coverage, to make sure you’re covered if someone gets injured at an open house, showing or other selling activity (something not commonly covered in typical E&O policies.)
Contact the team at CRES at 800-880-2747 for a confidential discussion today.
Read more on our ClaimPrevent® Summary: Real Estate Licensee Responsibilities When Creating New Listings
