So, a person’s name is stated on a Certificate of Title as the registered proprietor (owner) of land in Jamaica. That logically means that the person is conclusively and undisputedly the owner of that land, right? Maybe not.

Two months ago the Privy Council (Jamaica’s final Court of Appeal) handed down a rather worrisome judgement in the case

Recreational Holdings 1 (Jamaica) Ltd v Lazarus [2016] UKPC 22, Privy Council Appeal No 0085 of 2015 (which we shall now refer to as the case).

The crux of the case, as paraphrased from the judgement, is as follows:

A is the registered proprietor (owner) of land in Jamaica. Without A’s permission, B takes possession of the land and remains in open and undisturbed possession of it for more than 12 years. B’s possession of the land is what we refer to in law as “adverse possession” of the land, or “squatting” as we may colloquially state it in some instances.

Thereafter, A sells (or purports to sell) the land to C. C pays the purchase price for the property and has no notice of B’s possession of the land. Who owns the land… B or C?

According to the judgement in the case, if B asserts his rights accruing to him from his adverse possession of the land, effective as at midnight on the expiration of his or her 12 years’ of possession, the title “extinguishes” and ownership of the land vests in B.

Therefore, as A no longer owned the land as at the date of the purported sale of it to C, the sale of the land to C is null and void. C is left holding a useless title registered in his name. He has paid money and received nothing in exchange.

According to the case, Section 70 of the Registration of Titles Act explicitly subordinates the title of the registered owner of land to “unregistered rights” recognised under the Limitation Act which may have accrued to another party dating back to the date upon which a title was initially issued in respect of that land to the person originally registered as the owner of that land (and even if that owner is different to the current owner).

It matters not that the current registered owner was a “bona fide purchaser for value” of that property. That is, he or she purchased the property from the person previously stated on the title as the registered owner for value (the purchase price paid) and without notice of any prior claims, equitable interests or wrongful acts or dealings in respect of the said property.

NOT GOOD NEWS

In other words…the judgement handed down in the case is not good news for people dealing with real estate in Jamaica for the following reasons:

1. The sellers of registered land are in a precarious position as they may find themselves in a position where they have sold land to another person without either of them knowing about the overriding “unregistered rights” of a third person claiming ownership of that land by way of adverse possession. This exposes the seller to liability as the purchaser has the right to sue the seller for damages (a money judgement) for breach of contract for having not conveyed to the purchaser a good title.

2. A purchaser of registered land could be forgiven for relying on our title system in order to confirm that a person representing themselves as the registered owner of land is indeed the legal and rightful owner.

However, they may never know if some third person exists that possesses overriding “unregistered rights” sounding in adverse possession of the land which would usurp the purchaser’s ownership of land, regardless of the fact that they have purchased the property without notice of these rights and that the purchaser is currently registered on title as the owner.

In such a case, the purchaser may have to go through the arduous process of suing the seller of the land for breach of contract (who may also be an innocent party in this situation) and hope to recover the purchase price and costs associated with purchasing the land.

This may clearly manifest as a situation in which a purchaser of land, despite their best efforts at researching the ownership and dealings with the land (which may date back over more than a century) may find themselves holding a useless title of land which may have “extinguished” (as the case states) into thin air under section 30 of the Limitation Act.

As the case states it: “There remains no title for the vendor to pass…and none for his purchaser to receive.”

3. Lenders (mortgagees) have a penchant for requiring land as security for loans. In the world of loan collateral, land has historically been king and certainly preferred. Lenders may now be reluctant to lend money to borrowers seeking to secure their loans by means of registered land, as the lenders may well be uncertain as to who the actual owner of the land is, regardless of who the stated registered owner is on title.

Can you imagine lending someone money secured by land, only to find out that the mortgage that you have registered on the title is useless on account of the title having been “extinguished” in favour of a squatter?

The state of the common law (case law) interpreting the Registration of Titles Act and the Limitation Act is untenable.

We need to be able to rely upon the efficacy of our titles to land. Given that in the hierarchy of our laws, statutes (Acts of Parliament) trump the common law, it is imperative that all stakeholders advocate for the appropriate amendments to be made to the Registration of Titles Act and/or the Limitation Act in order to correct this situation. Otherwise, this may be catastrophic for business in Jamaica, including foreign direct investment, which Jamaica can ill-afford at this time, given the state of the economy.

Matthew Hogarth is the Managing Partner of MH&CO, Attorneys-at-Law, a boutique corporate law firm. He may be contacted at: mhogarth@mhcolegal.com