Sometimes an attractive option for older people is to build a granny flat at the rear of the home of one of their children.  The construction costs are usually funded by the parent on the understanding that he/she or they would be permitted to reside in the flat for the remainder of their life.  However, complications can arise and it is important that the agreement is fully documented.  Matters which should be covered include:

• Will the parent pay rent;
• Will the parent be responsible for a share of the Council rates and water rates;
• Will the parent be responsible for part of the insurance;
• What is to happen if the parent no longer wants to live at the property;
• What if the parent loses capacity or his or her health declines and has no option but to go into care (irrespective of whether the parent is agreeable to do so or not).

As soon as the granny flat is constructed, it forms part of the property and therefore the parent has no legal interest in the granny flat. Therefore, the rights of the parent to continue living at the property must be protected.

Totally unforeseen events can occur. For example, the child or his or her spouse may have to relocate for work and therefore decide to sell the property.  The child and his or her spouse may part company and as a result of the Family Law proceedings, the property may be sold or end up with the former son-in-law or former daughter-in-law.  Even worse, the child of the parent may die. The parent may have no interest in remaining living at the granny flat with his or her child’s former spouse (particularly if he or she remarries).  There are many things to consider.

If you seek advice about anything raised in this article, or want further information, please contact us on 02 4928 7300 or email willsandestates@mullanelindsay.com.au.

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