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Granny Flat Agreements: What are They and Do You Need One?

Are you considering downsizing and moving in with your son or daughter? Or are you thinking about transferring your home into your child's name and remaining there for your life remainder? Do you want to protect your interest in the property so that you can't be kicked out? Do you want to ensure that you can continue to live on your child's property if something were to happen to them?

If any of the above circumstances apply to you, you may want to consider protecting your interest by having a granny flat agreement prepared by a lawyer.

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What is a granny flat agreement (GFA)?

A granny flat agreement (GFA, or deed of family arrangement) is an agreement (usually in the form of a deed) which forms the terms and conditions that you and your family members (who own the land on which the granny flat is situated) have agreed upon concerning your life estate in a property.

A granny flat agreement is a life estate agreement, meaning that the tenant's interest in the property is valid for the remainder of the tenant's life. A granny flat interest is defined in the Social Security Act. The tenant does not have to live in an actual granny flat for a granny flat agreement to be used. It could be a bedroom in the main residence. The interest does not form part of your estate when you die.

A granny flat agreement is a formal document and is legally binding on the parties entering into the deed. For that reason, it is important that each party to the deed consider obtaining independent legal advice on the risks and benefits of the agreement before signing the deed.

It is important to consult a financial adviser and Centrelink as to the what effect a granny flat agreement will have on your financial status or Centrelink payment (if any). You can find more information about granny flat agreements and Centrelink on the Department of Human Services website. Further information about granny flat agreements can be found at the NSW Legal Aid website. 

Some of the information to be inserted into a granny flat agreement includes:

  • Who is a party to the agreement.
  • The terms of the life estate to be granted to the tenant.
  • Whether the money to build the granny flat has been loaned to the land owners in turn for the life estate.
  • Whether the money to build the granny flat has been loaned to the land owners in turn for caring for the person living in the granny flat.
  • Who is to pay for the maintenance and insurance of the granny flat.
  • Who is to furnish the granny flat.
  • Steps to be taken to resolve any disputes between the parties if they arise.
  • Who is to pay for the outgoings (i.e., electricity and water).
  • What would happen to the tenant if the land owners were to die.
  • How and when the granny flat agreement could be terminated or transferred.

How is a granny flat agreement different from a lease?

A granny flat agreement is different from a lease because it protects the tenant's interest in the property for the entirety of his or her life. A lease is used between two parties who are usually not related for the use and occupation of a property for the exchange of money (usually paid on a weekly basis). A lease is a purely financial transaction and has a specific ending date and rights to termination.

A granny flat agreement provides protection for family members who have transacted in a way which benefits the both the tenant and the land owners, but not necessarily just in exchange for money. An example of this might be when an elderly mother gives her son the money to build a granny flat on her son's property so that she can live there. Her son receives the benefit of the increased value of his property by having the granny flat built in exchange for his mother living in the granny flat without further payment (for the remainder of her life). Further consideration which may be made between the parties is the care provided to the elderly mother in exchange for the money to build the granny flat. The types and amount of care can be inserted into the agreement to ensure both parties know where they stand and what is expected in exchange for the money and life tenancy of the granny flat.

 

We never anticipate that there may come a time when you and your loved ones are unable to resolve an issue between you, especially if it were about something as significant as your livelihood and where you can live. It is better to protect your interests and those involved so that there is a mutual understanding as to the terms and conditions of your stay should you choose to begin a granny flat arrangement.

If you are considering a granny flat arrangement as an option for you, and you would like more information about a granny flat agreement, or would like an agreement prepared for your specific circumstances, contact Ardent Lawyers on (02) 4444 6808 or contact@ardentlawyers.com.au to obtain a fixed fee quote. Our fixed fee quote will guarantee the legal fees for preparing this document so that there are no hidden costs when it comes time to receive your bill from us.

We can also assist you by acting in your conveyancing matter if you are selling your home in order to downsize. We provide fixed fee pricing for conveyancing as well.

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