First Tier Tribunal decision: Implications on encroachment and adverse possession

A recent First Tier Tribunal decision provides further clarity on the law of encroachment. This decision is of interest to both commercial and residential landlords and tenants alike.

The recent decision of the First Tier Tribunal in the case of McGee & McGee v Long Term Reversions (Harrogate) Limited (2023/0552) provides further clarity on the law of encroachment.

Encroachment applies where a tenant possesses land that belongs to their landlord, but is outside of their demise. The decision is of interest to commercial and residential landlords and tenants alike.

Adverse possession

The notion of “adverse possession” – that if you occupy land belonging to another for long enough without the owner’s consent or objection it will eventually become yours – is familiar to many.

The law of adverse possession is complex, especially following the Land Registration Act 2002 (“LRA”) coming into force in 2003. The LRA introduced the modern system of land registration.

Prior to the LRA, once land had been adversely occupied for a period of 12 years or more the owner’s right to claim possession became time barred. The true owner would be unable to recover possession, and their title would then be extinguished. Generally, the next best title was the person in possession, such that they became the owner. These rules still apply to unregistered land.

The LRA, however, suspended the rules on limitation and prevented claims from becoming time barred in relation to registered land. Instead, a person who has adversely possessed registered land for more than 10 years can apply to be registered as the owner. The registered owner has the right to serve a counter-notice. If so, the adverse possessor must prove one of several, additional, limited grounds before their application can succeed. The most common ground is, in broad terms, that (1) the two pieces of land are adjacent (2) the precise boundary has not been determined and (3) that the applicant has reasonably believed for a period of at least 10 years that the land belonged to them.

This raises the question: do the rules on adverse possession also apply when a tenant encroaches on land that is owned by their landlord, but not included in their lease? And if so, how?

In addition to the LRA, the law of encroachment was rendered more uncertain by the decision of the Hong Kong Court of Final Appeal in Secretary for Justice v Chau Ka Chik Tso [2011] HKCFA 86.

While not binding in England and Wales, senior judges sat on the judicial panel, making it persuasive. The decision was split. The minority held that encroachment is a separate doctrine from adverse possession and arises of certain legal presumptions (estoppels) from the landlord and tenant relationship. For the majority, encroachment is part of the law of adverse possession.

If the majority is right, then a tenant seeking to rely on encroachment would need to comply with the LRA regime, including establishing one of the difficult grounds necessary to overcome a landlord’s counter notice.  An English Court faced with this issue would need to decide whether to follow the majority or minority in Chik Tso.

Decision in McGee

In McGee, the Tribunal was faced with exactly that conundrum. Mr and Mrs McGee were the owners of a long lease of a residential flat. The flat had access to loft space through a hatch in the roof, although the loft space did not form part of the demise. Mr and Mrs McGee used the loft for storage of their goods and eventually applied to add the loft space to their lease.

The Tribunal had little hesitation in rejecting the majority reasoning in Chik Tso - holding that encroachment is a separate doctrine to adverse possession, to which the rules and requirements on adverse possession do not apply.

The Tribunal held that encroachment is a form of estoppel arising from the landlord and tenant relationship. A tenant is, except in certain limited circumstances, estopped from denying their landlord’s title such that they are deemed to possess any additional land as the tenant of their landlord. This presumption or estoppel prevents the tenant from defeating the landlord’s title and claiming their landlord’s land as their own. In effect, a tenant cannot (except in certain limited circumstances) claim ownership of their landlord’s land through adverse possession but may apply to formally incorporate it into their lease.

In return for that protection, after the expiry of the relevant period, the landlord also becomes estopped from denying that the tenant holds the additional land pursuant to their lease. As a result, the 2002 Act adverse possession regime does not apply.

As a decision of the First Tier Tribunal McGee is not binding on other Courts, but it could be persuasive in future cases and show a direction of travel. This could make it easier for tenants looking to claim accretions to their lease and result in an increase in claims. Landlords should be wary of this and consider challenging encroaching tenants before the expiry of the relevant 10- or 12-year periods.