Had to call the city on my neighbors...UPDATED

If it makes that much of a measurable difference in property taxes it shouldn't of taken almost 10 years to notice it. There was absolutely no notice of this missing land over the years. No light bulb moment of "Wow look how small our yard is compared to our taxes" etc.

It can be a pretty big deal when you go to sell. It impacts: 
- The lot size on the listing. For example, we only searched for houses with lots over 0.25 acres. 3 feet the length of a lot could be enough to bump someone up or down in a listing category. 

- Setbacks. Say you go to build a shed or a patio. It has to be a certain distance from your lot line in most cities. A 3 foot encroachment might not be a lot when you've got an open yard, but 3 feet is a big deal (especially in smaller yards) when it comes to setback distance for a structure. 

I sit with the OP on this one.

Up to 1' on an existing fence - nah, I'd mention it but I wouldn't insist on them moving it.

But the neighbours went to replace that fence, find out they were 3' over and didn't fix it? AND put a pool right up against the fence? That is being a terrible neighbour and darn well they should move it onto their property. What did these neighbours tell the fencing company? "Oh, don't worry about it, they're cool with us being 3' over."

My coworker's neighbour made them move the front yard fence 8 inches over. When my coworker looked at the survey pins, they were indeed over. However, the neighbour was 3 feet over in the back. The neighbour actually fought them in court for a year to not move her portion! (and lost and had to pay court fees)

ETA: My coworker lived in their house 17 years with the original fence before the neighbour made the complaint. The 3 feet did not automatically become the neighbour's property.

Yeah, sorry, time to lawyer up. And whether or not you should have said something earlier, you build a fence three feet onto your neighbor's property, you take the risk that there is going to be a headache about it at some point. If the options are "neighbor war" or "hand over your property to your neighbor," I say, that isn't a reasonable place for your neighbors to put you. Do not blame yourself.

Of course, the sum total of property law that I took in law school was the required introductory course, but I recall that adverse possession requires someone not just to use the land, but to do it notoriously, without challenge. Perhaps there is a way for you to avoid adverse possession via a contract or letter or something while leaving the fence, if you don't care that much that it is where it is. But that is something you should talk to someone who actually took the advanced property courses about.

Any updates?

Good luck with the letter.

Good luck, I hope the letter works.

Yes, I agree, good luck with the letter. I hope they will move the fence.

We learned a few years ago that our house is actually built in the wrong spot--it extends a few feet over our property line and is actually on our neighbors' lot a bit. And *their* house is actually over the line onto the empty lot next door. Yeesh. Our lots are rectangular, and 5000 square feet, which is the minimum size lot you can legally build a house on (at least in Seattle). Neighbors have a fence running from the front of the lot down one side to meet up with their house, so the fence is also over the line. The fence has been up over 10 years, and the house has been there for 15 years now, so that part is not an issue. But the back of the house buts up with a greenbelt of trees and is unmaintained, so there may be issues down the line with the back half of their lot.

The developer who just bought the empty lot has been pressuring them a bit and threatening them, so they have a lawyer who is helping them. Worst case scenario: They will have to give up a chunk of the back of their land (basically the empty lot would go from a rectangular shape to an L shape with a chunk of the neighbor's property added into it). If this happens, the neighbors will be forced to take a chunk of *our* lot to make up the 5000sq feet, so they could someday sell their house and have a legally big enough lot. As it is right now, our house's lot is wider than is should be. We have a sort of side yard on one side that is bigger than it should be (house not centered on the lot like it should be), so we are sort of the winners in this.

Because of the potentially hairy legal situation, we (and our neighbors) are in a bit of a watch and wait mode right now. Hoping that the developer realizes that he can't bully our neighbors into giving him what he wants (he wants a chunk of their front yard, which has the fence and is beautifully landscaped with a water feature and exotic plants right up to the fence line), and lets the lot sit.

We have new neighbors moving in on either side of us (one family outgrew their home and the other is divorcing, so while the running joke around here is that we drove them out, we actually are on quite good terms w/them both) and I am always worried that something like this will happen to us!

Good luck - I hope you can get it all worked out w/out any more animosity than you're experiencing already!  

Do you have legal rights to remove the fence since it's on your property? I would seriously consider the ramifications, because it will likely cause a neighbor war. However, you've warned and asked them to change the fence's location. If there's a 10yr ownership law they are just BSing you and procrastinating until they can claim the land.

I think you need an attorney's advice asap. IMO, legal steps will be the only resolution to this problem. Your relationship is basically over with this neighbor. I wouldn't appreciate them taking 3 feet of my property & thinking it was okay. I wouldn't have waited 9 years though before addressing the problem.

Good Luck! I hope everything works out.

At this point I would take it down myself after giving them a week's notice that is what you were going to do.