Timothy Ellis, 38 and unemployed, is now entitled to sell the four-bedroom Victorian terraced house in Brixton, south London, and keep the proceeds.
The High Court ruled that Lambeth Council lost its claim to the property because it had made no attempt to assert its ownership rights within a 12-year period. The ruling prompted fears that other squatters might try to follow suit.
Under the Statute of Limitation Act 1980 anyone who has lived in a house for 12 unbroken years and has done something to show they regard themselves as the owner can keep the property. The act of ownership need amount to no more than changing the locks.
A housing law expert said yesterday that the council could have prevented Mr Ellis asserting his ownership rights by simply starting repossession proceedings. This would have effectively broken the period of Mr Ellis's possession.
Lambeth Council, which has one of the longest housing waiting lists in the country, lost a county court hearing over ownership last December. By then the 12-year period had elapsed, and housing officers had to rely on a claim that Mr Ellis could not prove continuous occupation since 1983. This was thrown out by the court.
A Lambeth council spokesman said the situation could not arise again. Houses are now re-let within four and a half weeks and housing officers monitor empty properties to ensure they are not taken over by squatters during that period.
But Mr Ellis's neighbours criticised the council for its inaction. Jason Taylor, 33, an engineer who bought his home five years ago, said: "If the council are stupid enough to lose a house for 16 years and then realise they have not done anything about it then it is their own fault. I think good luck to him."
In neighbouring Kildoran Road, an unemployed man, who gave his name as Ian, said he had been squatting for more than 10 years. He said: "Good luck to him, that's what all squatters think. It is my intention, if I am here long enough, to do the same thing."
Ian, 45, said he had lived in 17 squats in 22 years: "I'm just living in this house because I have nowhere else to live. I have a right to live here for free if I want. There are three other people living in this house and so it is taking homeless people off the streets."Reuse content