Since 1970 in New South Wales, the Limitations Act 1969 (NSW) specifies that a person must be in adverse possession of a property for at least 12 years before applying to become the registered owner. A recent decision of the New South Wales Supreme Court (‘Court’) looks at the requirements for a claim of adverse possession where two parties brought competing claims.

Background

Strel v Cordia [2016] NSWSC 1596 concerned a dispute between two persons claiming ownership of a property at Petersham (‘Property’) on the basis of adverse possession. The registered owner, Sylvia Graef, entered into a terms contract of sale with Richard Strel in 1959 (‘Contract’) who moved into the Property in 1960 with his wife and daughter. Mr Strel lived in the Property until his death in 1987.

After Mr Strel’s death, his daughter agreed to let the next-door neighbour Robert Cordia use the Property to store his belongings. Since he was using the Property for storage, he took it upon himself to pay the council rates and water for the Property from around late 1991 until March 2015. He also paid electricity to make the Property look “lived in.” In addition to performing maintenance on the Property, Mr Cordia removed the boundary fence that separated the Property from his property. According to Mr Cordia, Ms Strel raised no objection to these works.

In about October 1998, Ms Strel moved to the Blue Mountains and did not return to the Property for some time. She believed that Mr Cordia was looking after the Property for her and paying the expenses in exchange for him being able to use it for storage. Despite accepting that the Property was not his residence, Mr Cordia admitted to sleeping at the Property on infrequent occasions and using it as a mailing address.

Ms Strel did not take any steps to obtain legal ownership of the Property until 2015, when she lodged a caveat as the sole beneficiary of Mr Strel’s estate (Mr Strel’s wife had predeceased Mr Strel in 1981). She explained this delay because of the circumstances of her father’s death. Mr Strel’s death was caused by a violent assault he suffered in the Property one night and ever since, she found it too upsetting to be in the Property for very long. She stated that she rarely visited the Property and left all of her father’s belongings in the Property in the same state as when he died. Nevertheless, she believed that as the only child, she had inherited the Property.

Ms Strel later commenced proceedings claiming she was entitled to become the registered owner of the Property either on the basis of the Contract or, alternatively, on the basis that her family had possessed the Property since 1960 and thus extinguished Ms Graef’s title. On the other hand, Mr Cordia contended by Cross-Claim that he was entitled to be the registered owner since he exclusively possessed the Property from 1991.

The Contract

The first question for the Court to determine was whether Mr Strel had any right to become the registered owner of the Property pursuant to the Contract. At the time of the proceedings, neither the Contract nor Ms Graef could be located. While a caveat lodged by Mr Strel in November 1959 referred to the Contract and his standing as purchaser of the Property, there was no further documentation adduced to reveal the terms of the Contract.

However, based on evidence from a lawyer in the 1960’s about the usual provisions in terms contracts, the Court was willing to find that the Contract likely provided for Mr Strel to pay Ms Graef a purchase price by instalments over an unknown period of time. Ms Strel’s former husband gave evidence that in about 1970, Mr Strel referred to the Property as “my” property and that he had paid off the Property. The Court accepted this evidence as suggesting that by this time, Mr Strel had completed his payment obligations under the Contract and as such, was entitled to ownership of the Property.

The absence of any action taken by Ms Graef to recover possession of the Property supported this conclusion despite the absence of any action taken by Mr Strel to become the registered owner. The Court viewed Mr Strel’s inaction as more explicable than Mr Graef’s inaction in light of Mr Strel’s continued possession of the Property and the perceived security of Mr Strel’s caveat.

Therefore, upon Mr Strel’s death and the grant of letters of administration to Ms Strel on 15 May 2015, all of his rights in the Property vested in Ms Strel under section 44 of the Probate and Administration Act 1898 (NSW). Since Ms Strel was successful in enforcing the Contract, the Court did not need to consider Adelaide’s alternative claim to the Property pursuant to adverse possession.

Mr Cordia’s claim for possessory title

Having found that Ms Strel was entitled to become the registered owner of the Property, the Court then turned to determine whether her rights were defeated by Mr Cordia’s claim. The Court did not agree with Mr Cordia’s submission that Ms Strel granted him an indefinite lease of the Property from 1991. Instead, the Court characterised the arrangement as a contractual licence to use Property pending Ms Strel sorting out the “situation”. This did not amount to exclusive possession or indicating that Ms Strel would need to seek Mr Cordia’s permission to access the Property.

Several neighbours of the Property gave evidence that in the late 1990s and early 2000s, Mr Cordia told them that Ms Strel was letting him use the Property and referred to the Property as “her place”. The Court found this evidence did not support that Mr Cordia believed Ms Strel had abandoned the Property. The evidence from neighbours also did not support that Mr Cordia padlocked the front gate from 1991. Instead, the Court found it was more likely that the padlock was in place from 2012.

The Court ultimately dismissed Mr Cordia’s claim and ordered that Ms Strel was entitled to possession of the Property against him. The Court explained why Mr Cordia’s claim failed as follows:

“ I accept that Mr Cordia may have known in 2001 that the registered proprietor was Sylvia Graef, not Ms Strel, but I find that he did not then form the view that Ms Strel had abandoned the property and had no right to give him permission to occupy it. He continued to assume that Ms Strel was taking or would take steps to transfer the property into her name. It was not until 2013 that Mr Cordia came to the conclusions that Ms Strel was not in a position to give him permission to occupy the property, and that she had abandoned the property…It is well established that for possession of land to cause time to run under the Limitation Act the possession must be open, not secret; peaceful, not by force; and adverse, not by consent of the true owner…Use or occupation derived from permission or grant cannot be adverse…At least until 2013, any possession of the property by Mr Cordia was with Ms Strel’s consent. It follows that Mr Cordia’s claim that he has been in adverse possession for more than twelve years such that Ms Strel’s title is extinguished…must fail.”

Implications

Cases like these always act as a warning for those who wish to assert rights to a property. Both the plaintiff and the defendant in this instance could have benefited from taking action sooner. For registered owners, it is important to properly document the arrangements of those who you permit to occupy your property and avoid behaviour that may be seen as abandoning the property. And for those who are not the registered owner but nonetheless assert ownership rights to a property, seeking legal advice is paramount.

If you require legal advice about your rights with respect to a property, please contact HPL Lawyers on (02) 9905 9500.

The post “I Was Here First”: Missing Owner Leads to Competing Claims for Ownership of West Sydney House appeared first on HPL Law Group Sydney.

The primary decision

Behman v Behman [2016] NSWSCA 295 concerned a dispute between a father (Terry) and his son (Daniel) regarding the father’s home. After Daniel left school and commenced working, he continued to live with his father in the family home for a period of five years until he was 24 years old. During this period, Daniel paid all of his income ($204,000) into a bank account controlled by Terry and used predominantly to pay Terry’s mortgage. Daniel said he did so on the basis that his father had represented to him that he had an interest in the home.

These representations to Daniel, which Terry admitted to have started from when Daniel was only 11 years old, included the following statements:

• “This isn’t only my home, it’s yours and your brother’s so everyone needs to help”;
• “I’m not keeping it [the home] for me”; and
• “It is not just my money and your money. We all own the house so we all pay for it as a family”.

The Supreme Court of New South Wales (‘Court’) held that when the boys were young, given their age, it would have been unlikely that they understood their father to have meant by these representations that they were given an equal share in the home. However, this changed once Daniel became an adult and commenced employment at an accounting firm. From that time, the Court likened Daniel’s contribution to the various liabilities of the home to that of a de facto.

The Court ultimately ordered that the home should be charged with repayment to Daniel of an amount representing 1/5th of the net value (i.e. $120,000) and this was a reasonable reflection of what Daniel had contributed towards meeting the burden of the mortgage repayments “beyond what could be expected of a son living at home.” The Court granted this relief to the son on the basis that it would be unconscionable for Terry to retain Daniel’s wages without giving him an interest in the home.

Although the Court charged the home in support of Daniel’s equitable interest in the property, the Court also recognised that Daniel could have succeeded in his alternative equitable proprietary estoppel claim (i.e. preventing Terry from denying his interest in the home):

“ Having regard to the undisputed fact that Terry told him at the time after Daniel had become an adult that “this is everyone’s house”, “I’m not keeping it for me”, “we all own everything” and “it’s yours and your brothers”, I accept that Daniel understood that he would, by continuing to make his extensive contributions, have an interest in the property which reflected those contributions although the extent of that interest was somewhat vague. In a context where significant contributions had commenced to be made it is not surprising that Daniel should have so understood the words used by Terry and Terry’s response when Daniel asked for return of his money was “the house is the family’s and since you’re no longer part of the family you don’t own it anymore” effectively recognising the existence of the interest that Terry denies Daniel ever had.”

Equitable interest upheld on appeal

Terry appealed the Court’s decision on the ground that the primary judge erred in finding a common intention that Daniel expected to receive a joint interest in the property. Terry argued that the representations were informal conversations between family members that started when Daniel was a child and continued into his adulthood. As such, these conversation should be interpreted in light of their informal nature and not given a new meaning simply because Daniel became an adult.

The Court of Appeal rejected Terry’s arguments and dismissed his appeal, explaining its reasoning as follows:

“ At that time [March 2007] he [Daniel] commenced university and a new job and made clear that he wanted to be independent, to move out of the home and to manage his own affairs. The appellant [Terry] persuaded him not to do so because the contribution of his wages was necessary to enable the repayment of the mortgage and retention of the family home in which he had a joint interest. Exchanges to that effect continued over the subsequent period and, as the primary judge found, were a “factor in [the respondent] continuing to provide most of his wages and permitting those wages to pay for the mortgage and related property expenses such as council rates.””

Implications for parents

The Court did not recognise Daniel’s interest in his father’s home merely because his father told him that the home was his. It would not be unusual for a parent to make such representations to their children with the common understanding that the home would be theirs after the parent’s death. However, in this case, the child acted on this representation to his detriment by contributing all of his income to the mortgage payments. By such conduct, the Court was more willing to interpret such representations as conveying an immediate interest in the home rather than an interest delayed until the parent’s death.

By paying all his income into his father’s bank account, these payments were properly categorised not as rent, but as the pooling of resources for a common enterprise of maintaining the family home. Where children living at home are expected to contribute more than what would be reasonable in the circumstances, absent a written agreement to the contrary, there is a risk that they may be granted an equitable interest in their parents’ home in light of any statements made by the parent to the child. The Court found the father’s use of the word “own” was also significant so, unless intended, parents should avoid using words that connote ownership when talking with their children.

If you require legal advice about your living arrangements, please contact HPL Lawyers on (02) 9905 9500.

The post Flying the Nest with Part of the Nest Egg: Son Obtains Interest in Father’s Home by Paying Mortgage appeared first on HPL Law Group Sydney.