Even in today's depressed housing market, you might have trouble scrounging up the $10 to buy a somewhat functioning house. (Pro tip: if you're going to exchange one Alexander Hamilton for a house, put at least two bucks down so you can avoid having to pay private mortgage insurance. That could easily add another 18 cents to the price of the house.)

TUTORIAL: Exploring Real Estate Investments

Fortunately, there's a way around this whole business of exchanging your hard-earned money for a house. Depending on the circumstances, you can own a house for free - no inheriting or auctioning involved. It's not a government program, it doesn't involve threatening the existing owner's family and it's all perfectly legal. (To learn why the housing market changes so dramatically, read Why Housing Market Bubbles Pop.)

Just live there for a few years without the owner knowing and/or caring. Simple, huh?

Come on, you're joking.
Not at all. In fact, if the registered owner of a property challenges the ownership claim of someone who has lived there right under the registered owner's nose, the courts will rule with the resident every time (assuming he follows some other simple conditions that we'll get to in a second.)

Why would the government write laws ordering the owner of a house to give it up to squatters? Didn't we fight a war with England over this?
Well, first of all the law doesn't use the inelegant word "squatters." Instead, if you squat you're called an adverse possessor. But don't get too excited: adverse possession doesn't mean that you can wait until your rich neighbor leaves for a vacation, move in, change the locks and have your mail forwarded. There's a little more to it than that.

The rationale behind taking property from a taxpaying owner and giving it to a seemingly larcenous tenant is that every piece of land should enjoy its best possible use. With an absentee landlord who never visits, nor even has a representative keep an eye on the place, a property on an otherwise clean and tidy street could be covered in unkempt weeds and graffiti or worse. The neighbors' property values thus decrease, and the owner of the ignored property is negatively impacting the neighbors by his negligence.

As far as real estate case law is concerned, at least whoever's living there cares enough about the place to live there. That's more than you can say about an absentee owner. But again, we're talking about an absentee owner; someone who pays no attention to the place and hasn't for a long time.

How long a time?
It depends on the state. In Nevada, an adverse possessor has to live on someone else's land for at least five years before he can claim it as his own. In Hawaii, it's 20 years. Most states range from 5-30 years.

However, there's more to adverse possession than that. You can't build an underground tenement on one corner of the property and only come and go under cover of darkness. Every state requires that you live there openly and notoriously. Also, your living there has to be continuous and uninterrupted. So if your aforementioned rich neighbor goes to the Bahamas every winter, you can't move onto his house for 15 consecutive winters, return home every spring, then go down to the county assessor's office and claim his place as your own.

Sounds pretty clear in theory, but does it ever happen in real life?
You bet it does. In 2007 a Boulder, Colorado couple let their land sit unused for well beyond the state's 18-year requirement. Their neighbor - and let's ignore for a minute that the neighbor was not only a judge, but the city's former mayor - laid claim to the couple's prime tenth of an acre. The courts ruled in the ex-mayor's favor, and the couple had nothing but tax bills to show for the site of their would-be dream home.

The Bottom Line
If you're uncommonly determined, you can take adverse possession of a property, have all the contingencies break in your favor, and hope the current owner never gets wise within the prescribed period. But for most of us, it's easier to just shop for houses the old-fashioned way. (To help you in your quest to buy a home, see Are You Ready To Buy A House?)

Related Articles
  1. Credit & Loans

    How Does a Lease Work?

    A lease is an agreement between two parties where the lessor owns property that it allows the lessee to use pursuant to terms of the agreement.
  2. Economics

    What is a Leasehold Improvement?

    A leasehold improvement is an alteration made to a rented space that customizes the space for the tenant.
  3. Economics

    What is Joint Tenants with Right of Survivorship?

    A type of brokerage account where a surviving member inherits the other member's share of account assets upon the death of that other member.
  4. Home & Auto

    5 Rental Red Flags

    Know what to look for before entering into a rental agreement.
  5. Retirement

    Holding Titles On Real Property

    Find out how best to claim and convey ownership on your assets.
  6. Budgeting

    Take Advantage Of A Housing Crisis - Rent!

    When a housing crisis strikes, the big winners are often the renters.
  7. Personal Finance

    How To Rent Your Home So You Can Pay Your Mortgage

    If you own your home, but temporarily can’t afford the payments, and can’t a find cheaper place to live, temporarily renting your home may be the solution for you.
  8. Personal Finance

    To Rent Or Buy? There's More To It Than Money

    Your lifestyle, level of commitment and the trade-offs need to be carefully weighed.
  9. Home & Auto

    To Rent Or Buy? The Financial Issues

    Thinking of buying a home? We look at the initial and ongoing costs, as well as the so-called benefits.
  10. Home & Auto

    Reasons Renting Is Better Than Buying

    Owning a home is much more expensive than renting. Here are the places where the costs differ greatly.
RELATED TERMS
  1. Deed Of Surrender

    A legal document that transfers property ownership for a specified ...
  2. Modified Gross Lease

    A type of real estate rental agreement where the tenant pays ...
  3. Beneficial Interest

    The right to receive benefits on assets held by another party. ...
  4. Lease Extension

    A legal agreement that extends the term of a rental agreement. ...
  5. Single Net Lease

    A commercial real estate lease agreement in which the tenant ...
  6. Sandwich Lease

    A lease in which a party rents property from the property owner ...
RELATED FAQS
  1. What kinds of real estate transactions use triple net (NNN) leases?

    A net-net-net lease, also known as a triple net or NNN lease, is a type of real estate lease that requires the tenant to ... Read Full Answer >>
  2. What are the three "nets" of an NNN lease?

    A triple net (NNN) lease is a type of real estate lease in which the tenant is responsible for paying the building's property ... Read Full Answer >>
  3. What are the differences between single, double and triple-net leases?

    A net lease is a real estate lease in which the tenant pays, on top of his rent, one or more of the following expenses: property ... Read Full Answer >>
  4. Can you ask your landlord to remove a waiver of subrogation clause from your lease?

    You can ask your landlord to remove a waiver of subrogation clause, but you will both need to agree to its removal or the ... Read Full Answer >>
  5. Do landlords set up escrow accounts for their tenants' security deposits?

    Landlords must set up escrow accounts to hold tenants' security deposits if the accounts are required by the laws of the ... Read Full Answer >>
  6. Is a waiver of subrogation clause better for a tenant or a landlord?

    A waiver of subrogation clause is good for both a tenant and a landlord. A waiver of subrogation is a two-way agreement in ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!