Consider these situations

• An elderly couple sell their family home and invest the proceeds of sale in the construction of a granny flat at the back of a property owned by their daughter and her family.  Down the track, the daughter and her husband divorce, requiring the property to be sold.
• An elderly couple give money to their son to construct a granny flat at the back of his and this wife’s property.  The son passes away, leaving his interest in the property to his surviving wife.
• An elderly mother gives the proceeds from the sale of home to her daughter, so that she can build a granny flat in the home where she lives with her husband and children. The relationship between the elderly mother and her daughter breaks down.

In all of these situations, what return will the elderly parents receive? Only the cash contribution they made, or will they receive the benefit of any appreciated value because of market forces? Could a situation even arise where all of the money they contributed is put at risk?

What is a granny flat?

A granny flat is typically a self-contained unit within (or attached to) another home, often with the intent that the elderly resident can be close to family and help if required. Ideally, there needs to be a transfer of assets to the owner of the property in exchange for a life tenancy or interest in the property.

A granny flat arrangement does not necessarily require a separate residence – it just needs to be owned by someone else and you need to have established a “granny flat interest” (that is, a lifetime right to reside in someone else’s property arising from the exchange of assets or money).

It is important to distinguish a granny flat interest from an outright gift – there are various restrictions for gifting to family members (no more than $10,000 in a year unless they are given a granny flat interest).

Granny flat agreements

The trust that usually exists in family relationships often leads to arrangements between family members being made on an informal basis.  Sometimes, however, memories of the arrangement can be vague and disputes can occur, especially in relation to financial contributions when it is unclear whether the contribution is a gift or not, and when unexpected issues (such as those situations identified above) arise.

It is therefore recommended that all parties involved confirm the granny flat arrangement in writing, paying particular attention to possible scenarios that may arise, such as:

• What if we end up not getting along?
• What if my care needs change?
• If I need to go into a nursing home, what will the financial arrangement be?
• Am I sure that this is the best thing for me now and into the future?
• What if my family member’s marriage or partnership breaks down?
• What if the family is forced (or chooses) to relocate?
• Will I have my name on the certificate of title?

In documenting a granny flat agreement, it is recommended that you seek independent legal and financial advice.

Elder Law Disputes – what to do?

Getting legal advice as soon as a dispute arises is important. After seeking legal advice, mediation may be required to help resolve matters.

If court action is needed, it will be helpful if there is a good record of transactions, conversations, agreements, so make sure all documents are kept in a safe place.

More information

Matters involving family law or aged rights can be complex. If you do have an issue or concern that requires attention, or for more information on this topic, contact:

Mark Orchard
Family Lawyer
Phone:  07 4639 0358
Email:  morchard@cp484.ezyreg.com

Catherine Cheek
Aged Rights Lawyer
Phone:  07 4639 0357
Email: ccheek@cp484.ezyreg.com