Knowledge

In the world of property development, few things strike fear into a developer's heart more than legal uncertainty. Thankfully one particular question has now been addressed by the Privy Council, which serves as the highest court that parties can appeal to in the Cayman Islands. 

In its recent decision in Cayman Shores Development Ltd & Another v The Proprietors, Strata Plan No.79 & Others [2025] UKPC 27, the Privy Council clarified the status and enforceability of certain land rights in the Cayman Islands. The ruling provides important guidance for both land developers and legal practitioners when considering the registration and classification of rights over land.

A quick dive into the case 

The Britannia resort in Grand Cayman was developed in the late 1980s and early 1990s as a slice of tropical paradise including a hotel, golf course, tennis courts, beach club and four residential phases. The developers sold the residential units with rights (the "Rights") granting the owners of residential phases (the "Owners") the use of the beach, golf course and tennis facilities (the "Facilities").  The Rights were registered against the relevant titles but were mislabelled as "restrictive agreements" rather than "easements".

Fast forward a few decades and, in 2016, Cayman Shores Development Ltd ("Cayman Shores") purchased the land on which the Facilities were held.  At that time, Cayman Shores proposed to redevelop the land housing the Facilities and make the same available to the Owners, but only by way of licences as opposed to honouring the existing Rights. The Owners argued that their Rights to the Facilities were property rights in the form of easements, whereas Cayman Shores claimed that the Rights were restrictive agreements and were therefore unenforceable, as they were not in the proper form.  Litigation ensued.

The lower courts

The Grand Court sided with the Owners, deciding that the Rights constituted easements and stated that the relevant land registers (the "Registers") should be rectified accordingly.  Cayman Shores appealed the decision to the Court of Appeal, which reversed the ruling and held that the Rights were improperly registered as restrictive agreements and were therefore ineffective.

The Privy Council's take

The Privy Council has now, in the final act of these long-running legal proceedings, overturned the Court of Appeal's ruling and sided with the Owners.  It held that:

• the Rights were easements, despite being incorrectly described as restrictive agreements, citing that the Rights were easements in substance;  
• recreational rights to use the facilities of a resort could be granted to owners of residential units in the form of easements, referencing authority from a 2018 UK Supreme Court case; 
• the Rights were effectively registered, notwithstanding their label as restrictive agreements, as they were disclosed in the encumbrance section of the Registers and provided sufficient notice, satisfying the purposes of the Registered Land Act; and 
• there was no need to rectify the Registers to preserve the Rights as they were valid and binding.  However, it was noted that the Registrar may wish to tidy up the entries in the Registers to align terminology used with legal substance. 

The competing arguments were finely balanced, as was evident in the lower court rulings.  The Privy Council's decision reflects a modern, common-sense approach to determining proprietary rights.  It confirms that substance prevails over form, and that property rights of this nature will be protected in the Cayman Islands. 

Lessons for developers: read the fine print (and then read it again)

So how does this affect developers in the Cayman Islands real estate market?

• Label carefully: An easement is not a restrictive covenant and a restrictive covenant is not a licence. It is important to note that each serve distinct purposes and should be clearly distinguished.  Developers should take care to ensure that all relevant rights and reservations are properly documented and registered in a manner that reflects their true legal nature in full compliance with the Registered Land Act.  
• Plan for the future: Ensure any access rights, utility arrangements and recreational rights are properly structured to enable you to plan for the future and to tackle any infrastructure, planning or financial changes that may affect the feasibility of a proposed development.
• Involve legal counsel early: The Privy Council's decision underscores the need for comprehensive due diligence when dealing with third-party rights. Whether you are developing land or purchasing an existing development, ensure you obtain the necessary legal advice on the rights and obligations you are intending to create or acquire.

A lawyer as a development partner?

Let's be honest, the law isn't always the easiest beast to tame and missteps in structuring your development can lead to many years of litigation and headaches. Engaging a qualified property attorney during the planning and development stage can help ensure that your plans achieve the intended objectives. Whilst developers can move mountains (or at least dig through them), understanding legal nuances and ensuring the correct agreements have been prepared and registered, could be the difference between commercial success and failure.