The case law relating to adverse possession has occupied many a judicial brain in recent times. The ECHR’s decision in J A Pye (Oxford) Ltd & ors v Graham & anr adds a further twist, if only for registered land.

The law of adverse possession in relation to registered land arises by virtue of the cumulative effect of the Land Registration Act 1925 and the Limitation Act 1980. The Land Registration Act 1925 has since been replaced by the Land Registration Act 2002. However, the Limitation Act 1980 remains in force. Sections 15 and 17 of the Limitation Act 1980 (see box on p3) combine to provide that if a landowner fails to take action to recover possession of their land for 12 years or more, their title to the land is extinguished.

Justifications for the right to acquire by adverse possession

The historic right to acquire land by adverse possession has long been justified on the following grounds:

• It is part of the law on limitation of actions.
• If land and its ownership are out of kilter, the land may become unmarketable.
• In case of mistake, the innocent, but mistaken, squatter of land may have incurred expense.
• It facilitates and cheapens investigation of title to land.

Since compulsory registration of land was introduced, the justifications have been weakened. For registered land, the investigation into the ownership of land is completed by a view of the register. The ‘legalised theft’ of registered land by squatters has sat uncomfortably with public policy that has long dictated that land should be registered to facilitate certainty.

Neuberger J, as he then was, said in the Chancery Division decision of Pye v Graham [2000]:

It does seem draconian to the owner and a windfall for the squatter that, just because the owner has taken no step to evict the squatter for 12 years, the owner should lose 25 hectares of land to the squatter with no compensation whatsoever.

However, the arguments have remained as strong as ever in relation to unregistered land. Certainty is said to be achieved by land being claimed by those who occupy it and then being registered.

Land Registration Act 2002

The Land Registration Act 2002 changed the method by which title to registered land is acquired by adverse possession. The squatter no longer has to wait 12 years to make their claim. They can apply to the Land Registry (applications were formerly made to the court) once they can show ten years’ occupation. At that stage, the paper-title owner is notified and if they object, the squatter’s application will be rejected, except in the most deserving of cases. The paper-title owner then has a further two years in which to evict the squatter. After that two-year period (making a total of 12 years as before), the squatter can reapply to the Land Registry and will be registered as the owner if the paper-title owner has taken no action to recover possession in the intervening period.

Pye v Graham

A run of case law has recently come before the courts, relating to pre-LRA 2002 facts (see Hardy’s article in PLJ 148 for a full discussion of the cases). Since then, the ECHR has delivered a further judgment in the case formerly known as Pye v Graham. The judgment was handed down on 15 November 2005 and was brought by JA Pye (Oxford) Ltd and JA Pye (Oxford) Land Ltd (Pye) against the UK government.

The facts

Pye owned 25 hectares of agricultural land in Berkshire. Pye allowed the owners of neighbouring land, Mr and Mrs Graham, to occupy it under a grazing licence until 31 December 1983. Pye intended to develop the land and apply for planning permission, and so refused an application in January 1984 for a further grazing licence.

The Grahams remained in occupation and Pye made no request for them to vacate. In the summer of 1984 there was agreement that the Grahams could take a cut of hay from the land in return for payment to Pye. In December 1984 and May 1985 the Grahams again requested a grazing licence, but Pye did not respond.

In 1997 Mr Graham registered a caution at the Land Registry on the ground that he had acquired title by adverse possession. On 30 April 1998 Pye issued an originating summons seeking cancellation of the cautions, and in January 1999 Pye applied for possession of the land. The Grahams counterclaimed adverse possession.

The judgments

Neuberger J heard the case at first instance and refused the possession claim in 2000. He found that Pye’s title had been extinguished, and that the beneficiaries of the Grahams’ estate (Mr Graham died in 1998) were entitled to be registered as proprietors of the land. Commenting on the result, he stated that it did not accord with justice and could not be justified by practical considerations. The avoidance of uncertainty, he concluded, had little relevance to the use of registered land when the owner was readily identifiable by inspecting the register of the relevant title at the Land Registry.

This decision was overturned by the Court of Appeal in 2001 on the ground that the Grahams did not have the necessary intention to possess the land, with the result that the applicant companies were therefore not ‘dispossessed’ of it.

Between the first instance decision and the Court of Appeal hearing, the Human Rights Act 1998 came into force. That Act gives direct effect to Article 1 of Protocol No 1 to the European Convention on Human Rights (ECHR) (see the box, right), but does not apply retrospectively.

In the House of Lords’ decision in 2002, Lord Brown-Wilkinson explained that possession has two component parts. First, factual possession, and secondly an intention to possess. Possession with the consent of the paper owner did not suffice for the purposes of the 1980 Act. The Lords found that Pye had been dispossessed by Graham: the intention to possess was consistent with a squatter being willing to pay the paper-title owner while being in possession in the meantime. Furthermore, Graham had been in factual possession, and Pye had not given their consent. Consequently Pye lost their title.

The Lords were not pleased with the outcome. Lord Hope of Craighead said:

Fortunately... a much more rigorous regime has now been enacted in Schedule 6 to the 2002 Act. Its effect will be to make it much harder for a squatter who is in possession of registered land to obtain title against the wishes of the proprietor. The unfairness of the old regime which this case has demonstrated lies not in the absence of compensation, although that is an important factor, but in the lack of safeguards against oversight or inadvertence on the part of the registered proprietor.

On the human rights issues, Pye conceded in the House of Lords that the Human Rights Act 1998 did not have retrospective effect and so could not be applied in interpreting the 1925 or 1980 Acts. However, that did not prevent them from applying to the ECHR under Article 1 of Protocol No 1, which they did in December 2002. Their application was heard on 8 June 2004 and judgment delivered on 15 November 2005.

The ECHR case

Pye claimed that the UK law on adverse possession, by which they had ultimately lost their land, operated in violation of Article 1 of Protocol No 1. They argued that where land was registered, there was no uncertainty of ownership and no justification for depriving somebody of their title simply because they had not objected to a third person using their land. In these circumstances, they claimed that there was no public benefit in transferring land to persons in adverse possession. Pye claimed damages of at least £10m.

The UK government argued that:

• Pye’s interest in the land was equivalent to a defeasible interest, because from the moment they acquired the property it was subject to the pre-existing requirements of the Limitation Act and the possibility that they may lose the land if they failed to take action to evict squatters. The government claimed that it would be an unwarranted extension to the scope of Article 1 to give Pye a new indefeasible interest instead of protecting their defeasible interest.
• The state was not required to protect a professional property developer from the entirely avoidable consequences of failing to enter into contractual arrangements that would have enabled them to retain their interest in land.
• The limitations pursued a legitimate objective, namely, the public interest in preventing stale claims being brought before the courts, and in ensuring that the reality of unopposed occupation of land and its legal ownership coincided.
• Title could be obtained by adverse possession in a number of other jurisdictions (including Scotland, France, Germany, Hungary and Poland) and in no case was compensation paid to the former owner.
• Even if there had been a violation of Article 1, the government should not be required to pay compensation out of public funds, and if damages were awarded, the amount should be, depending on the valuation date, between £380,725 and £1,151,500.

The Court reached the following conclusions by a majority of four to three.

• The taking of property without payment of an amount reasonably related to its value will normally constitute a disproportionate interference that cannot be justified under Article 1 of Protocol No 1.
• As registered freeholders, the applicants’ title to the land was absolute and not subject to any restriction, qualification or limitation. It was not, therefore, a defeasible interest in land.
• Article 1 does not cease to be engaged merely because a person acquires property subject to the provisions of the general law, the effect of which, in certain specified events, is to bring the property right to an end.
• The provisions of the 1925 and 1980 Acts cannot be regarded as limiting or qualifying the freehold property right of the applicants at the moment of their acquisition.
• Article 1 of Protocol No 1 was engaged and the operation of the relevant provisions of the Limitation Act 1980 and the Land Registration Act 1925 in the present case constituted an interference by the State with Pye’s rights under that article.
• Where adverse possession bars claims to recover possession of property and transfers title to the property, such measures can only be justified by factors over and above those that explain the law on limitation. While the Court accepts the undoubted relevance and importance of these aims in the case of unregistered land, their importance in the case of registered land is more questionable.
• The taking of property in the public interest without payment of compensation reasonably related to its value is justified only in exceptional circumstances. There is no justification for treating the present case as an exception to the general principle.
• The application of the provisions of the 1925 and 1980 Acts to deprive Pye of their title to the registered land imposed on them an individual and excessive burden and upset the fair balance between the demands of the public interest on the one hand and Pye’s rights to the peaceful enjoyment of their possessions on the other.
• The parties should seek to agree the level of compensation and costs payable and the ECHR would allow them six months in which to do so.

It is interesting to note the emphasis on the fact that the land in question was registered. In my opinion, it is likely that if the land had been unregistered, the Court may have agreed with the government’s argument that the interest was defeasible. The majority were also heavily swayed by the fact that the Land Registration Act 2002 had been enacted:

The mere fact that a legal system is changed to improve the protection provided under the Convention to an individual does not necessarily mean that the previous system was inconsistent with the Convention. However, in judging the proportionality of the system as applied in the present case, the Court attaches particular weight to the changes made in that system and to the view of the Law Commission and the Land Registry as to the lack of cogent reasons to justify the system of adverse possession as it applied in the case of registered land.

Practical application

The combined effect of the decisions in Pye v UK and Beaulane v Palmer [2005], together with the Land Registration Act 2002, is to bring an end to the majority of claims for adverse possession of registered land.

No squatter will be able to claim registered land without the payment of compensation. The court in Beaulane commented that because it was unable to order compensation to be awarded and the period of occupation included time after 2 October 1988, the Human Rights Act 1998 prevented the transfer of the land.

Under Pye v UK compensation is arguably payable by the government (and not the squatter) where transfer of the land is effected by adverse possession and where Beaulane does not apply. The Pye decision is likely to produce fresh claims for payment of government compensation where landowners have lost title by reason of adverse possession. It may be that the courts extend the right to compensation under the Human Rights Act to unregistered land, although the case law is arguably limited to registered land. The courts may go even further by awarding damages for breach of the Human Rights Act where the landowner loses title after the two-year period under the 2002 Act, even where they have taken no steps to evict the squatter within that time-frame.

In an attempt to head off what could be a significant drain on the public purse, it is likely that the government will now look to review the law relating to adverse possession. It will need to reconsider the position as a whole, including the effect of Pye on cases falling within the new 2002 Act.