Legal minefield: When granny flat arrangements fail

Older people left homeless when granny flat arrangements breakdown

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Thinking of moving in with your adult children? Get legal advice first. Image: Shutterstock

Thinking of moving in with your adult children? Get legal advice first. Image: Shutterstock

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Macquarie University associate law lecturer and PhD student Teresa Somes warn of granny flat pitfalls.

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VULNERABLE older Australians are being left homeless and on the streets, when granny flat arrangements with their adult children fail.

What starts out as a 'perfect arrangement' whereby mum or dad gets accommodation and care in return for a financial contribution to their adult child's home, can turn into a legal minefield which destroys relationships and may end up in court, according to Macquarie University associate law lecturer and PhD student Teresa Somes.

And these family care arrangment are becoming increasingly common as the population ages and negative publicity around aged care facilities, especially in light of evidence coming before the aged care royal commission, discourages older people from going into residential care.

However, anecdotal evidence from judges and community legal centres is also showing that these arrangements are often breaking down usually to the detriment of the older person.

"The law that applies in these situations is property law," said Teresa. "But when you're looking at granny flat situations it's a very particular set of circumstances because you've got family involved."

Teresa said that these arrangements were often entered into in an emergency where the older person may have had a fall, or can't manage the house any more, and the parties involved do not take legal advice because it's within the family and it's a relationship of trust.

"The cases we see in court tend to be situations where the relationship has failed for some reason. The parties have just not got on or something has happened and they've said we can't live together any more. - Teresa Somes, Macquarie University associate law lecturer.

"It doesn't have to be parent and child it can be another relationship of trust and confidence, but that's really where the vulnerability lies because you think you're safe but you're not.

"The cases we see in court tend to be situations where the relationship has failed for some reason. The parties have just not got on or something has happened and they've said we can't live together any more," said Teresa.

"It may be the older widowed person meets someone else and they want to get married and she says,'well I thought I would stay here for the rest of my life but actually I want to start a life somewhere else and I've given you $150,000, can I have some of it back?'.

"But the money is now tied up in the older child's home and they say 'but we'll have to sell the house, we didn't anticipate this'," Teresa explained.

It doesn't have to be parent and child it can be another relationship of trust and confidence, but that's really where the vulnerability lies because you think you're safe but you're not. - Teresa somes, Macquarie University associate law lecturer.

The situation can also breakdown when someone agrees to look after their parent but after a while the parent needs more care, perhaps for a physical or cognitive disability, than the carer feels equipped to give.

"If the adult child doesn't say ok we'll re-mortgage or sell the house and give you back your money, then the elderly parent has to go to court and this is very complicated. You can't just go to a magistrates court and have it done in a day. You have to consult a barrister and go to the Supreme Court. It's lengthy, it's very emotionally draining and it's a very unpleasant experience; and because it's family involved most older people won't do it," said Teresa.

There can also be situations where the older person dies and the other siblings take action, saying you've got all of mum's or dad's money, there's nothing left for us.

The rules around a elderly parent transferring funds to an older child in exchange for accommodation and care can also be complex as far as the aged pension is concerned.

Under normal circumstances an older person on the age pension cannot gift their children more than $10,000 a year to a maximum of $30,000 over five years without it affecting their assets and thus their pension.

However, if funds are transferred to the adult child in return for accommodation and care then Centrelink may consider it a 'granny flat interest' and it may be exempt from the gifting provisions.

Teresa explained that in these arrangements the adult child has legal title and the elderly parent has no legal interest in the property.

"It's not to say they can't get their money back, they can, but they'll have to go to court."

In a recent case in the Supreme Court of NSW an elderly woman was asked to leave the home of her son and daughter-in-law to which she had contributed nearly $170,000. She was left couch surfing with friends.

Teresa recommends both parties sit down and discuss the situation and then get legal advice separately.

An older person considering a granny flat arrangement should ask: what if I need to go into care as some stage, what if I want to leave or what if we don't get on, what's going to happen if I want my money back? and they should get something in writing.

"If you have it in writing at least it's undeniable and the other party can't say, 'oh no this was an early inheritance'."

The older person should also see a solicitor on their own and have the risks and ways of minimalising them explained.

And if the situation goes awry, then the older parent should contact a solicitor, legal aid or a legal centre for advice.

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