What is adverse possession (or “squatters’ rights”)?
In New South Wales it is possible to ascertain land ownership by way of ‘adverse possession’. Adverse possession, commonly referred to as ‘squatters rights’, permits an individual to gain legal ownership over land which has been exclusively occupied for a minimum of 12 years.[1]
In short, such law may be understood through the phrase ‘use it or lose it’. Whilst adverse possession claims are extremely rare and seldom raised, the recent New South Wales Supreme Court decision in McFarland v Gertos [2018] NSWSC 1629 has garnered significant media interest, specifically outlining the potential risks associated with such claims to overlooked properties held by executors of a deceased estate.
Factual Background
In 2018, the New South Wales Supreme Court awarded property developer, Bill Gertos, a property in Sydney’s Inner West under ‘adverse possession’ laws.
The original registered owner of the property passed away in 1947, with the tenant of the property, Mrs Grimes, continuing to rent the property after the landowner’s death through protected tenancy. Mrs Grimes remained the property’s tenant until her death in 1998, rendering the property vacant. Mr Gertos, the Defendant, took possession of the seemingly vacant and abandoned property soon after Mrs Grimes’ death in 1998, changing the locks to the property and making several improvements including $140,000 worth of renovations.
In 2017, Mr Gertos applied to become the registered owner pursuant to section 45D (1) of the Real Property Act 1900, having continually possessed the property for 14 years. Under the law of ‘adverse possession’ as well as by reference to section 27 (2) of the Limitation Act 1969 No 31, a claim of ‘adverse possession’ may be brought against a Common Law owner after a period of 12 years. Thus, uninterrupted possession of property or land for a period of 12 years entitles the possessor to become the registered owner, when determined fit by the Court.
Judgement
The descendants of the original owner, the Plaintiffs, challenged Mr Gertos’ application to become the property’s registered owner in the New South Wales Supreme Court. Unaware of their entitlements to the property until 2017, the Plaintiffs argued that they held entitlement to the land through intestacy, given that they were the daughter and granddaughters of the original registered owner. They further argued that the Defendant did not have the requisite intention to possess the property and that as the original registered owner was deceased the limitation period should have been suspended on a disability basis.
The court rejected the Plaintiff’s arguments. The court noted that while the Defendant only sought to rent out the property, his conduct proved otherwise. Justice Rowan Darke found that there existed sufficient evidence to demonstrate that he had invested his own money into making improvements to the property, changed the locks, paid taxes, water rates, as well as leased it to rental tenants. Such acts all indicated an intention to possess, with no question on uninterrupted possession being raised. Justice Rowan Darke, held that “In essence, Mr Gertos succeeded in taking and maintaining physical custody of the land, to the exclusion of all others, and he has assumed the position of a landlord”.[2]
Ultimately, the court found that Mr Gertos had sufficiently shown to hold continual possession over the property well beyond the limitation period, successfully becoming the registered owner of the property in 2018.
Conclusion
While adverse possession claims are rare, the decision in McFarland v Gertos does act to demonstrate how land and property can be lost in claims where executors of a deceased estate have overlooked it.
It brings into light the nature of ‘adverse possession’ claims, in which landowners as well as their relatives should be wise in ensuring that such rare occurrences do not occur to their properties.
However, it is worth noting in this case that if the Plaintiffs had brought a claim within the 12-year limitation period, the thousands of dollars spent by Mr Gertos would not have made him entitled to ownership of the property.
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[1] Limitation Act 1969 No 31 (NSW) s 27(2).
[2] McFarland v Gertos [2018] NSWSC 1629, [43].