Thu Apr 11

If you squat in a vacant property, does the law give you the house for free? Well, sort of

Written by: Cathy Sherry, Professor in Law, Macquarie University

Nothing excites law students like the idea of a free house. Or alternatively, enrages them. It depends on their politics. As a result, academics condemned to teaching property law find it hard to resist the “doctrine of adverse possession ^[1]”. The fact that a person can change the locks on someone else’s house, wait 12 years, and claim it as their own, makes students light up in a way that the Strata Schemes Management Act never will.

The idea of “squatters’ rights” has received a lot of media attention recently amid the grim reality of the Australian housing market. It fuels commentators such as Jordan van den Berg, who critiques bad landlords ^[2] on social media. Casting back to his days as a law student, he’s promoting ^[3] the doctrine of adverse possession as a way of making use of vacant properties.

As interesting as the doctrine is, it has little relevance in modern Australia. While it is necessary to limit the time someone has to bring legal proceedings to recover land – typically 12 or 15 years, depending on which state you’re in – most people don’t need that long to notice someone else is living in their house. If a family member is occupying a home that someone else has inherited or a tenant refuses to vacate at the end of a lease, owners tend to bring actions to recover their land pronto.

So where did this doctrine come from, and what has it meant in practice?

Free house fetching millions

In unusual circumstances, people can lose track of their own land.

Just before the second world war, Henry Downie moved out of his house in the Sydney suburb of Ashbury. Downie died a decade later, but his will was never administered. At the time of his death, a Mrs Grimes rented the house and did so for a further 50 years. Downie’s next of kin did not realise they had inherited the house or that they were Grimes’s landlord.

Grimes died in 1998 and Bill Gertos, a property developer, saw the house was vacant. He changed the locks, did some repairs, then leased the house and paid the rates for the next 17 years. He then made an application under NSW property laws ^[5] to become the registered proprietor. At this point, Downie’s next of kin became aware they may have been entitled to the property and disputed Gertos’s claim.

The court held ^[6] Gertos had been “in possession” of the property since the late 1990s. The next of kin had a legal right to eject him, but they had failed to do so within the statutory time limit of 12 years. Gertos had the best claim to the house. He promptly sold it ^[7] for A$1.4 million.

Outrageous as this may seem, the law encourages caring for land. If you fail to take responsibility for your land, and someone else does, you can lose it.

An old English tradition

Gertos’s jackpot was unusual, and adverse possession has always been more relevant in a country like England.

First, for much of English history, many people did not have documentary title (deeds) to their land. People were illiterate, parchment was expensive, and documents could disappear in a puff of smoke in a house fire. The law often had to rely on people’s physical possession of land as proof of ownership.

Second, as a result of feudalism, vast swathes of England were owned by the aristocracy. They and their 20th-century successors in title, often local councils, had a habit of forgetting they owned five suburbs in London.

In the post second world war housing crisis, thousands of families, and later young people and students, squatted in vacant houses ^[9] owned by public and private landlords who lacked the means or motivation to maintain them.

A sign of the times

In contrast, in Australia, for most of our settler history, governments of all political persuasions actively prevented the emergence of a landed class.

But now, courtesy of tax policies that encourage investment ^[10] in residential real estate, we have a landlord class of Baby Boomer and Gen X investors. That has caused housing market stress as younger people cannot make the natural transition from being renters to homeowners. They are outbid by older, wealthier buyers whose tax benefits from negative gearing increase with every dollar they borrow to buy an investment property.

Money flowing into the market then means that landlords’ greatest benefit is capital gain rather than income, and thanks to John Howard, investors pay no tax ^[11] on half of that gain.

Finally, an almost exclusive reliance by government on the private sector ^[12] to provide new homes – which it will only do if it is making a profit – has left many people in deep housing stress.

While squatters in Australia are likely to find themselves swiftly subject to court orders for ejection, van den Berg’s rallying cry indicates just how inequitable the housing market has become. Baby Boomers and Gen X should be on notice – young people want their housing back.