Granny Flat Agreements 

We frequently assist multi-generational families who live on the same property. Very often, a parent has paid a lump sum to an adult child in return for a right to reside at the child’s property.

Everyone is happy and they get along because they’re family. Nothing could go wrong, could it? Unfortunately, our experience in situations where family live in close proximity and large sums of money have been invested proves otherwise. These type of family arrangements can and do go sour.

Tip – get advice and an agreement professionally drawn up before any gifting and living arrangement starts. The terms of the agreement are in writing and are clear to all parties. If you don’t and something goes wrong later, everyone recalls different conversations and they all have their own interpretation of what the agreement was between them.

Serious consideration needs to be made by each party of the arrangement as to what is going to happen now and what may happen in the future.

What are some of the things that could arise and that we recommend you give consideration to?

  • The parents were in receipt of a government pension but did not obtain financial advice. Will any “gift” result in the loss or reduction of their pension?
  • The arrangement is not discussed with other children of the parents causing disharmony due to the size of the gift. “That money is still part of our inheritance, isn’t it?”
  • Do estate planning documents need to be updated as a result of the gift? The parent should consider amending their Will as a result of the gift made to one of the children. And the child should also thinking about updating their Will.
  • Does the gift need to be repaid in any circumstances? For example, in circumstances where the child and their spouse separate. Does the money get repaid to the parent or does it now belong the child and spouse as it was a gift?  What if the child runs into financial problems or goes bankrupt and the bank sells up the property?  Is the parent’s money lost as well? Where will the parents live now if the “gift” is not repaid?
  • The parent needs to go to a nursing home. Can the parent now afford a nursing home, especially the type of home that the parent had hoped to have lived in?
  • What happens when the parent or child dies?

These are just some examples of things that should be considered. Getting everything documented from the outset is ultimately cheaper and less stressful than dealing with any issues later on.  Our property lawyers prepare Granny Flat Agreements all the time.  Speak to one of them if you need advice.