Finders Keepers –
Obtaining possessory title to real estate in NSW
Section 65(1) of the Limitation Act 1969 (NSW) is so
powerful that it can extinguish an owner’s title to real
estate if they don’t evict an unlawful occupier within 12
years. It states:
on the expiration of the limitation period [i.e.
12 years] … for a cause of action [i.e. to recover land]
... the title of a person having the cause of action to
the [land] … as against the person against whom the
cause of action formerly lay … [is] extinguished.
To claim possessory title, a person has two hurdles to
- The owner’s cause of action to recover possession of
the land must have accrued; and
- the person’s possession must be adverse and
continuous for 12 years.
In a recent decision of the Supreme Court of New South
Wales, an occupier successfully cleared both of these
hurdles. The decision is McFarland v Gertos 
NSWSC 1629 (30 October 2018) (Darke J).
We review the law of obtaining possessory title to real
estate in the light of that decision.
The facts of McFarland v
At 6 Malleny Street, Ashbury is a 3 bedroom house on its own
block of land. Malleny Street is a quiet suburban street
with one end blocked, next to Canterbury Racecourse in
Mr Downie purchased the house in 1927. He lived in it with
his family until shortly prior to the Second World War, when
he moved out because it was “full of white ants”, according
to his daughter.
Mr Downie died in 1947, without leaving a will. No grant of
administration has been made. At that time, the house was
tenanted to Mrs Grimes who was a “protected tenant”. This
gave her the right to occupy the house for life by paying a
small rental. She occupied the house for another 50 years
until shortly before she died on 19 April 1998.
In the second half of 1998, Mr Bill Gertos noticed that the
house appeared to be abandoned and was falling into
disrepair. He made enquiries of the neighbours, then entered
the house through the rear door. The door was off its hinges
and the house was open. Inside, he found rubbish, papers and
scraps, an empty wardrobe, a bed, a dirty mattress and some
broken chairs. The electricity was not connected, but there
was running water.
He concluded the house was not occupied, and was
uninhabitable because of its poor condition. He decided to
take possession. Mr Gertos made the roof weatherproof,
changed the locks and made it secure. He spent about
$35,000. He appointed a managing agent and rented out the
property. He paid the outgoings.
In 2014, Mr Gertos carried out substantial repairs, spending
about $108,000. He continued to rent out the house.
In 2017, Mr Gertos made application to be recorded as the
proprietor in fee simple of the land under s 45D(1) of the
Real Property Act 1900 (NSW).
Mrs McFarland, who was Mr Downie’s daughter, and two
grandchildren commenced these proceedings for a declaration
that Mr Gertos was not entitled to be registered on the
title to the property.
The owner’s cause of action
to recover the land must have accrued
Section 31(b) of the Limitation Act provides that the
cause of action does not accrue until the owner or their
legal representative is ‘presently entitled to possession’.
That is, not until the house was no longer tenanted.
Therefore, the cause of action to recover the land accrued
on 19 April 1998, the date Mrs Grimes (the tenant) died, not
1947 when Mr Downie (the owner) had died.
Section 38(1) of the Limitation Act states that:
the cause of action does not accrue [to the owner
or their legal representative] until the date on which
the land is first in adverse possession.
Therefore, the cause of action against Mr Gertos did not
commence until late 1998, when he took possession.
Therefore, the 12 year limitation period expired in 2010.
The person claiming must be
in adverse possession
The adverse possession must be:
Open, not secret; peaceful, not by force; and adverse,
not by consent of the true owner; (judgment para 70,
following Bowen CJ in Eq in Mulcahy v Curramore Pty
Ltd  2 NSWLR 464 at 475)
The court accepted these indicia that Mr Gertos was in
- The property was unoccupied when he took possession;
- He had the locks changed, made it secure and made it
- He rented the property to tenants though a managing
agent - there was evidence of a signboard on the
property and internet website advertising for a tenant
in 2005 – this was sufficient possession - it was not
necessary for him to physically occupy the property;
- The property was rented out more or less
continuously over the years, to a series of tenants;
- He paid Council rates, Water rates and usage
charges, land tax, maintenance and insurance premiums;
- He spent more than $100,000 in 2014 carrying out
- The income and expenses relating to the property
were declared in his income tax returns;
- He disclosed his possessory title entitlement in his
Family Law Proceedings in 2015;
- The property is a single dwelling suburban block.
Therefore, the court was satisfied that title held in the
name of Mr Downie was extinguished by reason of s 65(1) of
the Limitation Act.
It follows that s 45D(1)(b) of the Real Property Act
1900 (NSW) had been satisfied. Ss (a) i.e. the land is a
whole parcel of land and ss (c) i.e. the land is Real
Property Act title, were also satisfied. The court permitted
the s 45D Application for a Possessory Title to be
registered and Mr Gertos was registered on the title as
There was considerable public controversy when the decision
was handed down. These were the media headlines –
- Developer wins court battle to become owner of
vacant Sydney house (smh Oct 31 2018);
- ‘I decided to take possession of it’: Developer
claims squatter’s rights on $1.7 million Sydney home
(news Oct 31 2018);
- Sydney property developer awarded home under
squatting laws after renting it out for 20 years (abc
news Oct 31 2018)
Justice Darke anticipated this controversy, and stated this
to be the public interest:
one of the evident purposes of the provisions of
the Act [is] that where land remains in adverse
possession for a defined period the title holder will be
barred from seeking recovery of the land and the title
will be extinguished. This purpose may be regarded as a
reflection of the notion that there is a public interest
in ensuring that a person in long-term and undisputed
possession is able to deal with the land as owner.
(judgment para 88)
In almost all possessory title situations, a family
representative, neighbour or friend becomes aware of the
situation and takes appropriate action to secure possession
of the property within the 12 year limitation period.
The facts in McFarland v Gertos are unusual in that
the deceased owner’s family took no interest in the property
until it was too late. By the time they applied to the Court
in 2017, the 12 year limitation period had long expired.
The main reason appears to be that probate or letters were
not applied for after Mr Downie died. Had they been, the
property would have been known to be an asset of the estate.
The family may have a right to compensation. Provided they
make their claim within 6 years of becoming aware of the
adverse possession, they may well be entitled to
compensation for the value of the house, net of Mr Gertos’
expenditure, on the grounds of unjust enrichment.
This possibility was raised by Emmett AJA in Sieve-Storm
Pty Ltd ACN 160 562 354 as trustee for Affordable Property
Trust v Murphy  NSWSC 1800 at para 73. In that
case, Emmett AJA declared a residential property option void
due to non-compliance with the formal requirements of s 66ZG
of the Conveyancing Act 1919 (NSW).