THINKING ABOUT A GRANNY FLAT?

A granny flat solution seems so appropriate: you are getting older; your house is too big and getting harder for you to manage; you have an adult child and grandchildren with whom you have an excellent relationship and who could provide you with support and company in your later years. It sounds idyllic. 

Before you rush into such a care and accommodation arrangement be aware: such arrangements have been described as “a tangled web” of intricately connected legal, financial and pension issues and not necessarily the answer to your situation.

Thelma Langford v Deva and Diane Reddy and Ors [2012] NSWSC provides a case in point. The court found that Thelma Langford decided to transfer the title of her property into her daughter and son-in-law’s names on the basis that they would build a granny flat for her entirely at their expense in which she would live and that they would care for her for the rest of her days. And this worked out for a while but unfortunately problems arose (not unusual with such arrangements), and Mrs Langford went to court in an attempt to recover the title to her property.

The judge in this case did not damn granny flat agreements as such but he was very critical of the solicitor who acted for Thelma Langford and, inappropriately, for her daughter as well. He stated that the solicitor should have sent her to be advised by her own, independent solicitor; moreover he stated that the advice the solicitor gave her was limited and not sufficiently comprehensive. Most of all he did not advise her how to set up a granny flat arrangement which would minimise the impact of unexpected adverse changes in circumstances (seen so often in these granny flat agreements). 

In summary: if you are contemplating a granny flat agreement you should instruct a solicitor who is aware of the legal, financial and social security implications of such an agreement. 

The solicitor should advise you on:

• the effect the particular granny flat arrangement you are contemplating would have on your pension entitlements (think asset deprivation and possible consequent reductions in your pension)

• the security of your tenure of your property (should you have sole ownership, co-ownership or no ownership)

• the potential necessity for you to have a written detailed contract/deed which outlines all party’s responsibilities in the arrangement

• the effect on your testamentary intentions of entering such an arrangement (you may end up unintentionally disinheriting your other children).

Granny flats are sometimes the solution but it is wise to consult a solicitor who deals in such matters before you take the plunge!