@George Kamerzan, "What should I do?" George, you should immediately (today) claim in writing the property that you believe to be yours. Hand deliver one copy to your neighbor and mail a certified copy as well. Claiming your property will stop the clock from running on your neighbor's adverse possession of your property -if it is not already to late. Claiming your property can be done in a neighborly way without antagonizm.
Merely provide your legal description along with your measurements from known points which establish that XX' of his road and shed are on your property. Make it clear that the neighbor doesn't have your permission to use any portion of your real property. And state simply that to protect your title you require the neighbor to remove his personal property from your real property and stop trespassing.
In Washington State, someone who can prove that they have openly, continuously, and exclusively used your property (or your predecessor(s) for 10 years, can make a legally cognizable claim in court that the portion they have continuously and exclusively used should be awarded to them.
RCW 4.16.020
Actions to be commenced within ten years—Exception.
"The period prescribed for the commencement of actions shall be as follows:Within ten years:(1) For actions for the recovery of real property, or for the recovery of the possession thereof; and no action shall be maintained for such recovery unless it appears that the plaintiff, his or her ancestor, predecessor or grantor was seized or possessed of the premises in question within ten years before the commencement of the action."
Do not be confused by RCW 7.28.050 (Limitation of actions for recovery of real property -Adverse Possession under color of title deducible of record). Section 7.28.050 of WA Adverse Possession Law requires "Color of Title" (some apparent written claim on the title) and it also requires paying the property taxes for seven years on the portion of land being adversely possessed. RCW 7.28.050 is not likely to be applicable in your boundary line issue. Therefore, RCW 4.16.020 (cited above) would apply. Under RCW 4.16.020, your neighbor can defend any claim by you to actually own the land he has been using, by pointing out your claim is barred by the Statute of Limitations. You and your predecessor(s) waited too long to claim your property. If your neighbor files an action to obtain title to the land, or defends an action from your to remove him, and he/she can establish the land has been used exclusively by him/her, continuously, and openly for ten years, then the fact that you hold title is no defense.
RCW 7.28.320
Possession no defense.
The fact that any person or corporation against whom such action may be brought is in the possession of such property, or evidence of title to such property, shall not prevent the maintenance of such suit.
So I recommend first stopping the adverse possession clock by claiming your land. Once you've unequivocally claimed your property from your neighbor -then start gathering the facts (how long has he used the property exclusively, what can he prove, what can you prove, survey if needed) and reviewing the law to see who is likely to prevail if the matter goes to court. Bear in mind that often it is possible to negotiate with an adverse possessor for return of the land in exchange for not suing, or you can offer the neighbor cash to return you land instead of going thru the expense of suing him, or can request cash from the neighbor in exchange for not taking the matter to court. Some people are very hesitant to go to court. So let it be known that you are open to negotiating a resolution.
Final thought. Even if your neighbor meets all the WA requirements to adversely possess a portion of your land, a recent change in WA law (2011) requires that the adverse possessor repay you a prorated portion of the property taxes for the land they adversely possessed.
RCW 7.28.083
Adverse possession—Reimbursement of taxes or assessments—Payment of unpaid taxes or assessments—Awarding of costs and attorneys' fees.
(1) A party who prevails against the holder of record title at the time an action asserting title to real property by adverse possession was filed, or against a subsequent purchaser from such holder, may be required to:
(a) Reimburse such holder or purchaser for part or all of any taxes or assessments levied on the real property during the period the prevailing party was in possession of the real property in question and which are proven by competent evidence to have been paid by such holder or purchaser; and
(b) Pay to the treasurer of the county in which the real property is located part or all of any taxes or assessments levied on the real property after the filing of the adverse possession claim and which are due and remain unpaid at the time judgment on the claim is entered.
(2) If the court orders reimbursement for taxes or assessments paid or payment of taxes or assessments due under subsection (1) of this section, the court shall determine how to allocate taxes or assessments between the property acquired by adverse possession and the property retained by the title holder. In making its determination, the court shall consider all the facts and shall order such reimbursement or payment as appears equitable and just.
(3) The prevailing party in an action asserting title to real property by adverse possession may request the court to award costs and reasonable attorneys' fees. The court may award all or a portion of costs and reasonable attorneys' fees to the prevailing party if, after considering all the facts, the court determines such an award is equitable and just.
George, I am not an attorney, but I do work with adverse possession regularly -as the adverse possessor of legally abandoned real estate. I have posted a few articles about my work in BP blog. You might find of interest.
https://www.biggerpockets.com/member-blogs/12388-abandoned-property-adventure-on-wildside