Legal Hypothetical: Properly documenting Granny Flat arrangements

GLORIA, who was widowed a few years ago, intends to build a self-contained unit on her son’s property.

She will use her savings to build the ‘granny flat’ and will rely on the Age Pension to meet her living expenses.

She wishes to live in the granny flat for the rest of her life.

Gloria seeks legal advice and is advised that with a view to minimising the potential for disputes in the future, the arrangement should be documented in writing.

A written agreement will also be useful for Centrelink purposes and necessary for capital gain concessions.

The solicitor takes instructions regarding a range of issues, so that an appropriate Granny Flat Agreement can be prepared.

The payment of the construction and approval costs is addressed.

Gloria’s contribution towards the payment of outgoings, such as utilities, insurance and council rates are considered.

They also discuss the termination of the agreement, whether this is the result of Gloria requiring full-time care, the breakdown of her son’s relationship with his wife, a desire to relocate by either party and whether, if the agreement is terminated, Gloria is entitled to receive compensation and if so, whether this is a lump sum or whether it is determined by way of a formula based on the time that Gloria has occupied the unit.

They discuss whether Gloria should be able to lodge a Caveat over her son’s property to protect her ‘equitable interest’.

The solicitor also takes instructions relating to Gloria’s wishes regarding the unit when she passes-away and the interplay between the Granny Flat Agreement and her Will.

The terms of a suitable Power of Attorney and Appointment of Enduring Guardian are also considered as part of her estate planning generally.

The solicitor advises Gloria that her son should obtain his own legal advice in relation to the proposed arrangement and that she should also take the draft agreement to Centrelink to ensure that it complies with the gifting/deprivation rules.

Email Manny Wood, Principal Solicitor and Accredited Specialist in Wills and Estates at TB Law at or call him on (02) 66 487 487.

This column is only accurate at today’s date and is not legal advice.
By Manny WOOD, Solicitor

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