A Prerequisite to Obtaining Real Estate Through Adverse Possession

By: Patrick G. Murphy

Indiana Code § 32-21-7-1 provides a party claiming title through adverse possession must demonstrate that he or she paid taxes on the disputed land. Wetherald v. Jackson, 855 N.E.2d 624, 641 (Ind. Ct. App. 2008). There is an exception if the adverse possessor believes payment was made, but the belief must be reasonable. Fraley v. Minger, 829 N.E.2d 476, 493 (Ind. 2005).

In Fraley, the Supreme Court reiterated that Indiana law requires that a claimant complies with the adverse possession tax statute. It is not enough to demonstrate all the common law elements of adverse possession (control, intent, notice, duration). Moreover, the party attempting to claim adverse possession must demonstrate the elements by the heightened “clear and convincing evidence” standard, not the typical “preponderance of the evidence” standard, usually applicable to civil cases. In Fraley, the parties claiming adverse possession had met all of the elements but had not demonstrated that they had paid taxes on the disputed parcel.

Since the Supreme Court’s decision in Fraley, many decisions have addressed the application of the adverse possession tax statute. Shortly after Fraley, the Court of Appeals decided DeWart v. Haab, 849 N.E.2d 693 (Ind. Ct. App. 2006). As in Fraley, the trial court determined that the claimants had shown by clear and convincing evidence that they were the owners of the tract in dispute through the doctrine of adverse possession. On appeal, the sole issue was whether the claimants had complied with the adverse possession tax statute. Because they had not, the Court of Appeals reversed the adverse possession determination.

In Daisy Farms Limited Partnership v. Morrolf, 915 N.E.2d 480 (Ind. Ct. App. 2009), the Court addressed the issue of a farm asserting it satisfied the adverse possession tax statute because it had a good faith belief it was paying taxes on the disputed parcel. The Court of Appeals affirmed the trial court’s ruling finding the farm’s argument that it “sincerely believed” it was paying taxes on what it “believed were the legal boundaries” which it “believed” included the disputed tract was legally insufficient to satisfy the statute. Id. at 489 (emphasis in original). First, the Court held that a recorded encroachment agreement executed by the farm’s predecessors in interest with the current owners’ predecessors in interest clearly showed the respective ownership of the lots in dispute. Id. at 489. Thus, the farm had constructive notice of the true legal boundaries. Id. at 489-90. Further, according to tax records, the true owners had always paid real estate taxes on the lot that included the property in dispute. Id. Thus, the Court held that the claimant’s belief – even if belief alone could satisfy the adverse possession tax statute – was not reasonable under the circumstances. Id. at 490.

For more information contact a member of Barrett McNagny's Real Estate Law team. 

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