A granny flat interest is established when you exchange assets or money for a lifetime right to reside in someone else’s property.
This means you could transfer ownership of your home but retain the right to live there for the rest of your life. Or you could transfer assets, such as money, for the right to live on someone else’s property for the rest of your life.
Having a legal document drawn up by a solicitor is definitely recommended for these situations. Evidence of the arrangement can help to prevent problems in the future should either party’s personal circumstances change or the relationship sour.
An agreement could cover who does what for the other (eg. cooking and cleaning), who pays the bills, what happens if your health deteriorates and care needs change, or how you will be compensated if the property owner cannot maintain your life interest.
A granny flat interest cannot be revoked because the owner wishes to sell the property. They may:
• Sell the property with your arrangement as a condition of sale,
• Transfer your interest to another property, or
• Compensate you financially for losing your granny flat interest.
A granny flat interest only exists during your lifetime though and cannot form part of your estate. It is therefore important for people to address their estate plan when entering to granny flat arrangements to avoid disputes down the track.
To find out more about Granny Flat Interests read our previous blog: Will building a Granny Flat affect my pension…?