HWL Ebsworth Partner Gary Newton and Law Clerk Khushaal Vyas discuss the recent NSW decision in McFarland v Gertos  NSWSC 1629, where the Defendant succeeded in becoming the registered owner of the property despite never having purchased or rented the premises.
Gary will present the Conveyancing and Property Law Update at the Legalwise Property Law Roundup Seminar in March in NSW. He previously presented on New Leases, Significant Leasing Reforms, Developments and Trends at the recent Legalwise Critical Leasing Updates, Drafting and Negotiation Seminar in NSW.
In the case of McFarland v Gertos  NSWSC 1629, a case which garnered significant media interest, Bill Gertos (the Defendant) occupied a vacant 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 a previous owner of the property, the Defendant was able to show he 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 in the first place – making it a truly novel case.
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. Following her death, the property became vacant and upon noticing that no one was in possession of the property, the Defendant took possession in late 1998 and argued that he had been in possession ever since. During this time, the Defendant changed the locks of the property and made several improvements and renovations in order to make it habitable. Following the Defendant’s alleged continual possession for over 14 years, he applied under s 45D(1) of the Real Property Act to be recorded as the registered owner of the land. This was because under the law of adverse possession and statute of limitations, 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.
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, 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 is 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 let out 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.
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 adversely possesses excess land that another landowner was the registered owner of.
Partner Gary Newton is an accredited specialist in property law since 1994 and has a built broad property practice since 1983. Gary advises on a variety of real estate transactions including retail leasing and commercial leasing, both for landlords and tenants, property acquisitions, property developments and sales including residential, commercial, retail and industrial, buying property in Australia, strata, community and neighborhood title law, property joint ventures, due diligence, finance and structuring, partitions, environment and planning; and general property advice. Gary has been named in Best Lawyers™ Australia for Leasing Law and Real Property Law. Gary has also been recognised in the Recommended Tier of the ‘Leading Property & Real Estate Lawyers’ for the 2018 edition of Doyle’s Guide. In 2016, Gary was listed as a recommended lawyer in Real Estate by the Asia Pacific Legal 500.
He has been recognised in the Asialaw Leading Lawyers Guide (2017) as Leading Lawyer in Construction & Real Estate and has been selected for inclusion in the Asialaw Profiles Legal Directory (2017 & 2018) for Real Estate. He was also awarded in 2016 a Lexology Client Choice Award for his excellence in client service in the area of Real Estate. Gary is a member of the Law Society Property Law Committee and is the current Chairman of the Australia Property Law Group of the Law Council of Australia, General Practice Section. Gary has published 8 books on property law including 2 books in 2017. Gary is one of the authors of the LexisNexis Butterworths NSW Conveyancing Service (loose leaf). Gary is a regular speaker at Property Law Conferences. For the Real Estate Institute of NSW Gary presents a regular webinar programme for commercial real estate agents. Contact Gary at [email protected] or connect via LinkedIn.
Khushaal Vyas is a Research Clerk at Baker McKenzie. He is a final year undergraduate Arts/Law student at the University of New South Wales where he was President of the UNSW Law Society and was a finalist for Australian Law Student of the Year 2017 & 2018. Connect with Khushaal via LinkedIn.