Legal Question in Real Estate Law in California

An easement won't establish a new property line. All it would do is give X a right to build and maintain his fence on Y's property.

In order to do a lot-line change, considerably more work would be necessary, including an application to the county and a lot more paperwork than you want to deal with.

An easement for the fence seems to be appropriate, and doesn't require county and (probably" lender approvals.

Easements don't need to be surveyed and recorded, but in this case it's probably a good idea; try to find a licensed surveyor who can prepare a description and then attach it to a completed grant of easement form, ready for the neighbor to sign before a notary, then record it.

This would be simpler than doing an actual lot-line adjustment.

I agree completely with Mr. Whipple. A lot-line adjustment is the only way to establish a new property line. An easement cannot be used to establish a new property line, but a lot-line adjustment is far more complicated than it would be worth to solve your problem. Follow Mr. Whipple's advice. Get a surveyor's legal description of the location of the fence line and the portion of your neighbor's property that is inside the fence line. Then go to a title company and pay them a few dollars to turn that into an easement for "exclusive use and occupancy" of the property described in the surveyor's legal description.