Granny flat agreements typically concern family arrangements where accommodation is provided by an adult child for their aging parent in return for payment of money or a transfer of assets to the adult child. The granny flat interest lasts for the life of the aging parent.
A granny flat interest doesn’t just cover the situation where a granny flat is built for grandma in her son or daughter’s backyard. A granny flat interest may be created when:
- An older parent transfers ownership of their home to their adult child in return for the child agreeing to move into the parent’s home and provide care and companionship to the parent;
- An older parent sells his or her own home and pays for a self-contained unit (granny flat) to be built on their adult child’s property in return for the right to live in the unit for the rest of their life, the child agreeing to provide care and companionship to their parent;
- An older parent sells his or her own home and pays for modifications to their adult child’s home and moves in with the adult child for life with the adult child agreeing to provide care and companionship to the parent; or
- An older parent and their adult child may sell both of their homes and purchase a new home in the adult child’s name in return for the right of their aging parent to live in the home with their adult child with the child agreeing to provide care and companionship to the parent.
Granny flat agreements involve significant legal and financial issues, including significant implications for pension entitlements. Before entering into a granny flat arrangement, it is important to get legal and financial advice to ensure that decisions are fully informed and in order to protect the parties’ interests as much as possible and help avoid difficulties in the future.
Granny flat agreements should be drafted carefully with proper consideration given to all possible concerns and scenarios, both short term and long term, to best protect both parties’ interests.
For more information contact Fleur Craig of Armour-Craig Legal on (03) 5636 4986.