We all want the best for our family, whether it’s assisting a child to save a deposit for the purchase their first home, or looking after an elderly parent. Understandably, many families see a “granny flat arrangement” as a common way to address these types of need.
Granny flat arrangements are all too common in Australia. These situations arise when say an older relative pays for the construction of a flat, purchase of a property or house extension of a younger relative in exchange for the older relative being granted the right to live in the property (ostensibly for the rest of their life).
Although these types of arrangements start out with the best of intentions, they often end in tears due to poor planning and a failure to communicate and set-out expectations up-front. Relationships breakdown and families change, that is the human condition. For example: changes may see a father having to live with his son’s ex-wife, or an elderly mother being pushed to the brink of homelessness. Breakdowns in relationships lead to disputes about property rights and then to the long and winding road that is litigation. The following cautionary tales are from actual cases.
In this older case, a father and mother migrated to Australia from England to live with their only son and his wife. The Parents contributed the required money for the purchase of a property, which contained separate living areas for both the parents and the son & his wife. The property was held in the names of the son & wife subject to an oral agreement where the parents were provided accommodation for life. Tragically, the mother passed away and the son & wife divorced. Unfortunately, the son left the house following the divorce and the father and the ex-wife of the son continued to live in the granny flat arrangement together. This resulted in the father suing both the son and his ex-wife in the Supreme Court of NSW to regain the contributions the parents had made to the property so that the father could return to England. The father ultimately won based on principles of equity and trusts.
In the more recent case of Spink, an elderly mother contributed part of the purchase price for a property to live in with her daughter and her daughter’s husband. This was based again on an oral agreement where the property would be held in the children’s name in exchange for the mother being able to live in the property indefinitely. The mother did not seek any legal advice and relied on the generosity of the children in seeking a lifetime living arrangement.
As is all too common in these cases, the relationship between the mother and children broke down, and the children forced the mother out of the house. Such a falling out led to potential homelessness for the mother, as she was forced to live with close friends until she was approved for public housing. The mother sued her daughter & husband in the Supreme Court of NSW to regain the money she had contributed towards the property. The mother ultimately won based on principles of equity and trusts, similar to the outcome in Malsbury.
What Do These Cases Tell Us?
Although we can never imagine such granny flat arrangements going astray, this is almost always what people think before entering into such an arrangement.
It is much better to save costs by engaging lawyers to plan for these situations rather than paying hefty fees down the line to go to court. You should always be mindful of the following before entering into a granny flat arrangement:
This article was co-written by Lawyer, Jack Harman.