The Cayman Islands Grand Court recently delivered a decision concerning rights in respect of residential properties that were developed in conjunction with a resort hotel and sold with the benefit of agreements that entitled owners in Britannia (Owners) to enjoy, upon payment of a fee, certain benefits of the resort, namely the right to play tennis on certain tennis courts, to play golf on a golf course and to access certain beach club facilities forming part of the resort (Rights).
The decision is of interest for what it says about what happens to such rights when (1) the hotel and resort cease to operate; and (2) certain of the facilities cease to be usable. The hotel and resort had ceased to operate in 2004 (following Hurricane Ivan), although the golf course, beach and tennis courts remained to some extent in place. The land on which the resort stood was successively sold until it was acquired in 2016 by Dart. When Dart acquired the land, the land registers pertaining to it recorded that certain agreements (Agreements) had been entered into with respect to the land. The legal effect of those Agreements was the subject of considerable uncertainty, as the 184 pages taken up by the judgment attest.
Dart, who had not been involved in creating the Agreements, brought the proceedings to clarify the legal position surrounding the golf course lands. While the judgment offers some clarity to certain matters, there remain considerable uncertainties about the future use of the land.
The Agreements were recorded on the land register as “restrictive agreements”. Under Cayman property law certain types of rights granted by one landowner in favour of another may be registered as restrictive agreements and will pass to successive owners when the land is subsequently conveyed. They benefit landowners who succeed to the title which benefits from the Agreements and bind landowners who succeed to the title that was burdened by the agreement.
The Rights were not created or registered as easements, they were created and registered as restrictive agreements. The Cayman Registered Land Act provides that easements must be created using a particular process and form – which was not adhered to nor used. As the Registered Land Act is a complete code it might be thought that an easement cannot be created in any manner other than the process specified by the Registered Land Act. The judge, however, decided that an easement can be created even where: (1) there is a considerable departure from the prescribed formal requirements; (2) where there is no reference on the document itself that it seeks to register an easement; and (3) when the Registrar is not asked to register an easement (para 225 of the Judgment).
The judge went on to deal with the fact that the Rights had never been registered as easements by holding that the Land Register could, and should, be altered by the Registrar after the event to record that easements had been created and registered against the land. The decision is interesting as it indicates that even when process and procedure (in creating and registering legal rights) are not followed, the court is willing to assume what the intent of the parties were many decades earlier and after the land has changed hands more than once on the basis of the erroneous registration.
As to the tennis courts, the judge exercised a statutory power to extinguish the Rights as they applied to the tennis courts on the basis that the courts were of no real use to the Owners - one of them lay under a highway and the other had not been used in years.
The judge also clarified that Dart has no obligation to maintain the land as a golf course and this gives rise to an intriguing question: Will the golf course ever be used as a golf course and if it is not, what use does the land now have? Since closing the golf course, Dart had maintained the property as undeveloped land and it can no longer be used a golf course without the investment of a seven-figure sum. If the land is to be returned to its former condition as a golf course, it is estimated between $1,000,000 - $2,000,000 a year would be required to keep it in that condition. Although there were assertions from the Owners that the land would be turned back into a golf course, it is far from certain that the Owners will decide to take this step and Dart to date has not received any communications from the Owners in this regard.
Pursuant to the Judgment, if the land is not turned back into a golf course, the Owners have no right to go on it or use it for any other purpose, as the only thing the Owners are allowed to do on the land is play golf. At the same time Dart is unable to modify the land to allow it to be used for any other purpose. Should this not-implausible scenario come to pass, it may become impossible to put the land to any good use. Cayman Islands’ law places controls on the extent to which land can be burdened with obligations in order to prevent situations arising in which land becomes encumbered in a way that prevents the land at some future time being put to good use. It seems entirely possible that this may be the very outcome of this decision as it affects the land on which the golf course sat.
As a result of the uncertainty as to the use of the golf course lands, Dart has filed a Notice of Appeal. While seeking further clarification from the Court of Appeal, Dart will continue to liaise with the Owners on membership fees for use of the beach facilities and to confirm the Owners’ plans to finance the maintenance of the land as a golf course.