…would you pay rent for using it instead?
As the New York Times reports, that seems to be the strategy of a born-again* mortgage broker in Florida. Mark Guerette has devised a strategy for creating ownership interests in abandoned property (or property that at least appears to be abandoned) through adverse possession.
The broker scours neighborhoods for properties that appeared abandoned, especially focusing on those that have a nuisance notice posted by local authorities.
He then simply takes possession, cleaning and fixing up a bit, and then leases these properties he doesn’t own to tenants. It’s sorta like leasing someone the Brooklyn Bridge, but Guerette has been careful to inform, in writing, the tenants on the leases that he has no ownership interests in the properties.
Adverse possession is a disfavored means of acquiring real property ownership. The statutes vary as to time requirements, but generally require about ten years of actual, open, hostile (to the true owner’s interests) possession, and the payment of any charges or taxes that accrue during the time of possession.
After the specified time paying taxes and openly possessing the property, the adverse possessor can then file a suit to quiet title in order to perfect title in himself. Assuming he’s successful, the decree in the suit operates as a vesting deed.
Except that Mr. Guerette is leasing an interest he does not possess, this actually seems a fairly reasonable response to the supply and demand problems at current prices in the housing market. If property is so derelict until nobody is willing to claim it at its Fed-supported price level, why not allow squatters, and why not allow them to earn an ownership interest if they’ll possess and maintain the property for a specified time period? Instead of Gators, Floridians might be renamed “Sooners”.
Of course, all those that are profoundly offended by the procedural hijinks revealed in foreclosuregate should be likewise aghast at such an idea. It would, as is claimed of filing false foreclosure affidavits, upend centuries of developed common and statutory law. But the common and statutory law that we follow today was developed during an era when land, and the crops it might produce or livestock it might sustain, formed the foundation of all wealth. Those days are past. Now the value in real estate, at least so far as residential real estate goes, especially since the rise securitization, lies in its ability to command an income stream from the people that live on it. If no people live on it, its value precipitously declines. Allowing squatter’s rights to ripen into clear title more quickly and more defensibly could work wonders at helping the market clear.
But there’s really no need for a middleman broker like Mr. Guerette. Squatters could deal directly with the state. Alas, the state of Florida, that has done everything right since the hurricanes of the mid-aughts if their design was depressing land values in Florida, including not least their recent attempts to slow and even halt foreclosures, has arrested Mr. Guerette for fraud, and plans to try him next month. Florida’s real estate mess will apparently continue unabated until the warming ocean finally retakes the peninsula.
*”Born-again” in this context means that Mr. Guerette has found the Lord and no longer brokers mortgage loans, instead he does the more Christ-like thing, and leases property he doesn’t own.