Understanding the Boundary Issue in Question
First, make sure you have a full understanding of the cause and nature of the dispute. You will need to get a professional analysis of whether you are encroaching on your neighbors' property or vice versa and find out how long the encroachment has gone on, how much land is being encroached upon, and whether permission was ever given to encroach.
murshedek articles on "Neighbor Disputes" can help with this process, covering issues like fences and boundaries, and offering summaries of your state's laws on boundary fences, adverse possession, and more.
To obtain the needed information about your and your neighbor's properties, you will most likely need to have a survey, appraisal, and a full title search performed. If you had any of these done when you purchased the property, and still have them, you can use them at this stage and save the expense of having them redone. However, you will most likely need to obtain new information if you must proceed to trial.
During a survey, a licensed surveyor will physically locate the boundary of your property based on the legal description contained in your deed. This will help determine if your boundaries are located where you believe they are, and how much land is being encroached upon.
An appraisal will tell you the market value of the piece of property in dispute.
A title search will find all recorded documents in the chain of title of your property and will show if there are any easements or deeds that may affect your ownership interest in the property. For example, the previous owner of your property may have granted an easement to the neighbor that was not discovered when you purchased the land or may have outright deeded the property to the neighbor.
The chances of something like this having occurred increase if you did not conduct a title search, but instead received a quitclaim deed when you obtained the property. If you purchased a title insurance policy covering your property (most likely a requirement if you financed your purchase using a mortgage), any issues like this should have been discovered by the title company and the title company may have to cover the costs of sorting out the matter.
Consulting with an attorney at this point is also a good idea, to determine whether you have a valid claim and what additional information you will need if the issue proceeds to litigation. You may, unfortunately, discover that you have no case, or that you are in fact encroaching on your neighbor's property just as the neighbor had claimed, in which case litigation will be futile if you cannot reach an agreement with your neighbor.
Opening Discussions With Your Neighbor
The area and value of land in dispute may be small enough that the issue is best resolved by mutual agreement rather than by rushing into court. Litigation costs add up quickly, and can easily exceed the value of the land in question. How you proceed greatly depends on your relationship with the neighbor. Keeping things friendly, or at least civil, is often the best approach.
If your relationship with your neighbor allows, try to speak with him or her about the issue. Perhaps there's simply a misunderstanding, which can be cleared up between the two of you.
Although consulting with your attorney is advisable prior to talk with the neighbor, try to leave the attorney in the background for now – in other words, don't get the attorney involved in communications with your neighbor, or take any action to file a lawsuit. A personal visit, phone call, letter, or even an email from you will be better received than a letter from your attorney, or actions like filing a complaint or placing stakes or ribbons on the land you claim is yours. That's especially true if your neighbor doesn't yet know that you believe there's a boundary issue. You will figure out shortly after speaking with your neighbor whether attorneys will need to be brought in.
Sending a Demand Letter to Your Neighbor
Assuming the law is on your side, and private discussions between you and your neighbor have not been productive, a letter from your attorney to the neighbor explaining the situation and either requesting action or containing a reasonable offer to settle can possibly resolve matters.
An offer to settle may include a compromise to divide the property at issue, modify additional boundary lines, not at issue, or offer or request a monetary payment to settle the issue. Even if the law is on your side, it may ultimately be cheaper (and significantly less hassle) to "purchase" the property from your neighbor rather than proceed to trial.
However, your actions may also put your neighbor on the defensive. Your neighbor is likely to forward your letter to his or her attorney. Do not be offended, or interpret this to mean the neighbor is not willing to negotiate or compromise. It may simply mean that the neighbor wants to understand the options fully. After all, you sought out an attorney first.
Sharing any information you have, including surveys, title work, and appraisals can show you are being open and honest and are willing to work towards a resolution. It also gives your neighbor a full understanding of the situation without requiring him or her to separately incur these costs. (A neighbor who incurs costs will likely want to recoup these in the end.) However, don't be surprised if your neighbor does want to obtain (and even pay for) independent information.
Proceeding to Court (or Settlement)
If the demand letter and other negotiations among your respective attorneys are not getting you the hoped-for results, it may be time to file a complaint in circuit court, most likely to "quiet title." This means you ask the court to consider all your evidence and arguments (and your neighbor's evidence and arguments) and decide who legally owns the land at issue.
At this point, your attorney should already have most of the information needed for the complaint. Nevertheless, because preparing for litigation requires a great deal more research and paperwork (in order to satisfy the court's requirements for legal briefs, exhibits, and so on) costs will begin to add up quickly.
If, during the early stages of the litigation, the case appears ripe for a settlement, a conscientious attorney will try to minimize the costs of the demands placed on the opposing party. For example, the attorney might limit requests for documents known as "admissions" and "interrogatories." Because most disputes settle short of trial, it is often wise to proceed with an eye towards settlement, keeping relationships cordial and costs down, while remaining prepared for trial if it becomes unavoidable.
The court may even require you to attempt mediation in order to reach a settlement. It is important to select a mediator who is experienced in real estate matters. The mediator will be able to guide the discussion and negotiation, and provide real-world insight into possible outcomes where the matter to go to trial. Retired judges often make excellent mediators in these situations, as they have probably seen and ruled on issues like yours in the past.
If mediation is unsuccessful, the settlement might still be possible, but your focus should now shift to trial preparation. Determine how much the land is worth to you, and whether going forward with the trial is in your best interests financially and otherwise. In rare circumstances, you can recoup your costs from the other party, but often the best outcome you can hope for is to win your case and obtain clear title to the land while incurring significant expenses. The worst outcome would be to lose the case and still be out of your expenses. Sometimes a small strip of land is just not worth fighting over.