Adverse Possession: When Risk Brings Reward

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The case of McFarland v Gertos [2018] NSWSC 1629 is one which garnered significant media interest. Bill Gertos (the Defendant) took possession of a vacant (seemingly abandoned) property in 1998 and sought to be recognised as the registered owner of the property in 2017 under the law of adverse possession. Whilst this application was contested by the descendants of the previous owner of the property, the Defendant was able to show that he had had continual possession over the property well beyond the limitations period. The Defendant was therefore successful in becoming the registered owner of the property despite never having actually bought or rented the premises – making it a truly novel case.

Factual Background

The property in question was located in the inner west Sydney suburb of Ashbury. The original registered proprietor of the property was a Mr Henry Downie, who passed away in 1947. The tenant of the property was a Mrs Grimes who continued renting the property after Mr Downie’s death through a protected tenancy. She remained a tenant right up until her death in April 1998. The property became vacant following her death, and upon noticing that nobody was in possession of the property, the Defendant took possession in late 1998. The Defendant changed the locks of the property and made several improvements and renovations in order to make it habitable. Following 14 years’ alleged continual possession, the Defendant applied to be recorded as the registered owner of the land pursuant to the provisions of s.45D(1) of the Real Property Act. This was because under the law of adverse possession and statute of limitations, the uninterrupted possession of property for 12 years will allow the possessor to become the registered owner. It was following the Registrar-General’s notice of intention to grant the Defendant’s application that descendants of Henry Downie (the Plaintiffs) launched an action to restrain the Registrar-General from registering the Defendant as the registered owner of the property.

Judgment

The Plaintiffs argued that they were entitled to the land through intestacy, that they were not barred from recovery of the land as the cause of action did not accrue until the Defendant sought to register the land, that the Defendant did not have the requisite intention to possess the property and that because Henry Downie was deceased, he was of such a disability that the running of the limitation period was suspended.

The Court rejected these arguments. Whilst the Plaintiffs argued that the Defendant only sought to rent out the property and did not seek to possess the property, the Court highlighted that the Defendant’s conduct proved otherwise. The acts of making significant investments in improving the property, changing locks, paying water rates and land taxes all indicated an intention to possess. Furthermore, given that the property was almost continuously rented meant that there was no real question of uninterrupted possession. The Court also rejected the Plaintiffs’ argument that the Defendant’s possession was ‘secret’ and not open; an argument which could have been used to deny the validity of the Defendant’s adverse possession. The Court found that the mere fact that the neighbours had never seen or dealt with the Defendant did not indicate secret usage. Indeed, the paying of outgoing costs and taxes was sufficient evidence of open possession.

Given that the relevant limitation period for bringing forward an action had expired and that the Defendant had a valid claim of possession over the property, the Court held in favour of the Defendant. The effect of the decision meant that the Defendant was able to become the registered owner of a property he had never officially bought.

Lessons

There are two broad messages to absorb from such a case.

Firstly, whilst this case saw significant media coverage and some outrage from homeowners, it is important to note that cases of adverse possession are incredibly rare. This is because the limitations period to bring forward an action is of great length (12 years). Additionally, investing in a property that is possessed adversely is of high risk. Indeed, had the Plaintiffs brought forward a valid claim within the limitations period, the hundreds of thousands of dollars spent by the Defendant on the property would have been in vain and would not have made him entitled to become the registered owner of the property. Ultimately, landowners and the next of kin of those landowners would be wise to monitor their property to ensure such an odd event in the law does not occur with regards to their property.

Secondly, landowners should ensure that their fencing and borders are in accordance with the borders of their lot of land. Indeed, operating for over 12 years under the false assumption of incorrect fences and borders may mean that a neighbour inadvertently and adversely possesses excess land that another landowner was the registered owner of.