Legal Question in Real Estate Law in California

Not sure if you meant to refer to X both times in the last paragraph, or if one should be Y. I presume from the way this is written that you're a lawyer, and your client is X not Y. X should tender the claim to its title insurer first of all. Second, once I knew all the facts (which I don't), I would consider advising X to do nothing. I would take the position that Y owns the portion of the walls on Y's land, and X owns the portion of the walls on X's land. X should offer to let Y get temporary construction access to X's property if Y wants to spend the money to replace the wall system with some other code-approved, and engineer-approved hillside stabilization measure, including relocation of utility lines. Prescriptive easement probably does not work for X since it does not authorize permanent occupations. Adverse possession probably does not work since it requires X to have paid the property taxes on Y's land. There may be an angle in the unique case of Hirschfield v. Schwartz that would allow X to keep the wall in place. Good luck.

X's situation does not satisfy the conditions of adverse possession. It sounds like a decent case for prescriptive easement. If the properties were part of a housing development, rather than custom homes built at different times, there is also a case to be made that the portion of the retaining wall on Y's property was an intentional improvement to satisfy Y's obligation to provide necessary geological support to protect X's property. If the hillside on Y's property were to come down on X's property, Y could be liable to X. Therefore, particularly if constructed together, there is a pretty good case that the portion of the retaining walls on Y's property actually belong to Y and Y is not only not entitled to have them removed, Y is obligated to maintain them for the protection of X's property.

I would add, after reading the other answer, forget about title insurance. I am a former Vice President of Fidelity National Title and Chicago Title. Every title insurance policy in use in California excludes boundary disputes and encroachments.

I prefer Mr. McCormick's analysis to Mr. Collins', in that the doctrine of prescriptive easement seems well-suited to protection of X's interest in the present location of the retaining walls, and that a title insurance claim is of no use. Whether X chooses to sue now for quiet title in a prescriptive easement or to do nothing is a choice that depends upon factors not mentioned in the question, including how big a jerk Y has decided to be, and X's financial circumstances, or perhaps whether he needs to put the question to rest once and for all in order to market the property or something like that.

In addition to prescriptive easement, California has a statutory enactment of its policy regarding good-faith improvements of property owned by another, see Code of Civil Procedure sections 871.1 to 871.7, and a body of law, largely case law, regarding encroachments in general. A practitioner representing X (or Y) should be aware of these in case one or the other is controlling, but I am inclined to think this is a fairly clear-cut easement by prescription at this point.

Y is an idiot. X has a duty to maintain those retaining walls under the doctrine of adjacent and lateral support. Removal of the walls will cause Y's home to subside and fall onto X's property.