A client recently inquired as to whether adverse possession applied
to his situation. Without disclosing client confidences, here are some basics about the concept.
-
The common law rules for adverse possession have been codified under Indiana statutes. See §32-21-7.
The Indiana Supreme Court has held that the doctrine of adverse possession
entitles a person without title to obtain ownership to a parcel of land upon clear and convincing proof of control, intent,
notice, and duration, as follows:
(1) Control
— The claimant must exercise a degree of use and control over the parcel that is normal and customary considering the
characteristics of the land (reflecting the former elements of "actual," and in some ways "exclusive,"
possession);
(2) Intent —
The claimant must demonstrate intent to claim full ownership of the tract superior to the rights of all others, particularly
the legal owner (reflecting the former elements of "claim of right," "exclusive," "hostile,"
and " “adverse");
(3)
Notice — The claimant's actions with respect to the land must be sufficient to give actual or constructive notice to
the legal owner of the claimant's intent and exclusive control (reflecting the former "visible," "open,"
"notorious," and in some ways the "hostile," elements); and,
(4) Duration — the claimant must satisfy each of these elements continuously for the
required period of time (reflecting the former "continuous" element) now 10 years.
(5) Payment of Taxes — Indiana's adverse possession statutes
require the payment of taxes by the adverse claimant in boundary disputes. The Court does not permit disregard of the
statutory tax payment requirement. In addition to rephrasing the common law elements of adverse possession, in 2005
the Supreme Court renewed the applicability of the adverse possession tax statute, now codified at Ind.Code §32-21-7-1.
That statute requires the claimant or adverse possessor to show, in addition to the elements of common law adverse possession,
that he or she has paid and discharged all taxes and special assessments the adverse possessor reasonably believes in good
faith to be due on the land during the period the adverse possessor claims to have possessed the land adversely.
Disclosure of Defective Conditions in a House
A recent case decided by the Indiana Court of Appeals dealt with
the issue of fraudulent misrepresentation by a seller and reliance on the Residential Real Estate Disclosure Form by the buyer.
The sellers decided to sell
their home located in Crown Point. Sellers had lived in the residence for 4 years. Before buying the residence, the
previous owner provided sellers with a completed and signed Residential Real Estate Sales Disclosure form (Disclosure Form).
In the Disclosure Form, the prior owner disclosed seepage in one corner of the basement during heavy rain. When sellers took
possession, however, they discovered substantial water leakage throughout the basement and thereafter initiated a lawsuit
against the previous owner for misrepresentation.
While the seller occupied the house, the amount and severity of water seepage subsided and
sellers said that they believed that a neighbor's rerouting of a sump pump discharge line away from the property had caused
the change. Sellers determined no repairs were necessary and later spent a significant sum to remodel the basement. The House
also contained a basement gas fireplace.
When Sellers decided to sell the Residence, they contacted a local real estate agent who entered into a listing contract
with them. A new buyer, through his real estate agent, toured the house Buyer walked through and inspected the
house on at least two occasions and ultimately submitted an offer. Buyer was provided a copy of the Disclosure Form filled
out and signed by the sellers.
In response to the disclosure question, "[a]re there moisture and/or water problems in the basement or crawl
space area," sellers gave a positive response and provided an additional narrative answer: "During heavy rainfall,
possible light seepage in SE/SW corner of basement." The Disclosure Form also noted that the fireplace was "Not
Defective." Buyer originally agreed to purchase the Residence contingent upon his obtaining a satisfactory home inspection
report, but later expressly waived this right in writing and accepted the property "as is". Before closing on the
home, Buyer inquired further about the water seepage issue and sellers provided waterproofing quotes which were made available
to prospective buyers. Sellers did not provide information about the previous water damage that occurred when they purchased
the house from the prior owner or the lawsuit against the prior owner.
Within forty-five days of Buyer taking possession of the residents,
the basement flooded on two occasions. In the course of repairing the water damage in the basement, a pegboard wall covering
was removed wherein Buyer discovered a crack in the west wall of the basement. Additionally, when Buyer attempted to use the
gas fireplace in the basement it would not operate because of a gas leak.
Buyer contacted sellers requesting reimbursement for these items, sellers
refused, and Buyer then filed a Complaint alleging fraudulent misrepresentation regarding the condition of the residents:
(1) the nature and extent of alleged water intrusion in the basement; (2) the existence and extent of alleged structural damage
to the basement wall; and (3) the defective condition of the basement fireplace.
To establish a cause of action for fraudulent misrepresentation
Buyer must demonstrate: (1) Sellers made false statements of past or existing material facts; (2) Sellers made such statements
knowing them to be false or made them recklessly without knowledge as to their truth or falsity; (3) Sellers made the statements
to induce Buyer to act upon them; (4) Buyer justifiably relied and acted upon the statements; and, (5) Buyer suffered injury.
Buyer's fraudulent misrepresentation
allegations regarding flooding in the basement are based upon the Disclosure Form. Indiana law requires a seller to provide
a potential buyer with a disclosure form before an offer is accepted for the 1163 sale of residential real estate. See IC
§32-21-5-1.
The disclosure form must include
the owner's disclosure of the known condition of the residence's foundation, roof, and water and sewage systems. IC §32-21-5-7(3).
Another code provision, IC §32-21-5-9, specifically distinguishes a disclosure form from a warranty, and contains a provision
specifically limiting a seller's liability for errors in a disclosure form:
--
The owner is not liable for any error, inaccuracy,
or omission of any information required to be delivered to the prospective buyer under this chapter if: (1) the error, inaccuracy
or omission was not within the actual knowledge of the owner or it was based on information provided by a public agency or
by another person with a professional license or special knowledge who provided a written or oral report or opinion that the
owner reasonably believed to be correct; and (2) the owner was not negligent in obtaining information from a third
party and transmitting the information.
--
Sellers' did not rely on a contractor's
assurances in completing the Disclosure Form with regard to water seepage in the basement. More important than how much protection
is granted by representations in a disclosure form is the question of the extent of Sellers' actual knowledge at the time
they completed and signed the form. Sellers were required to show that there was no question regarding their knowledge of
the extent of water leakage at the time the Disclosure Form was completed.
As to the west wall of the basement, while Sellers maintained that they
had no cause to remove the pegboard from the wall and discover the defect, the question again is one of actual knowledge of
the defect. The water damage the Sellers experienced after purchasing the house from the prior owner and the extensive remodeling
they undertook raises a question of whether they were truthful in completing the disclosure form.
However, as to the fraudulent misrepresentation
claims involving the basement fireplace, the sellers relied on expert inspections. Regarding the basement fireplace, Sellers
used the written report of a professional heating company, which stated: "Lit pilot and checked operation of lower level
fireplace. Checked upper fireplace operation. Both units are operating normally." IC §32-21-5-11 provides that Sellers
are not liable for any error or inaccuracy in a disclosure form based on information provided by a person with a professional
license who provided a written opinion that the owners reasonably believed to be correct.