A recent Gold Coast court case highlights why families need more than good intentions when entering into multi-generational living or a granny flat arrangement, writes Attwood Marshall Lawyers’ Senior Associate and Accredited Aged Care Professional, Larisa Kapur.
In a recent Queensland Supreme Court judgment, Shannon and Brett Alderson were ordered to pay over $420,000 to Shannon’s 76-year-old mother, Bonnie Cook, after reneging on an unwritten agreement that allowed Ms Cook to live with them rent-free for life.
As part of the agreement, Ms Cook had contributed more than $270,000 towards the purchase price and fit-out of a granny flat on the Alderson’s Ormeau property.
The Aldersons purchased their Ormeau property for $825,000. Ms Cook contributed $110,116.41 toward the purchase price and spent another $160,804.42 converting a detached garage into a granny flat where she would live.
Over time, tensions arose between Ms Cook, Shannon, and Brett, with the Aldersons deciding they could no longer live together.
To try to end the arrangement, the Aldersons offered Ms Cook $250,000 to leave their property, but she refused, claiming it was not enough. Ms Cook had sold her home for $425,000 in 2015 when the arrangement was struck, but, as is often the case when re-entering Australia’s increasingly heated property market, to purchase a similar home again would require a budget of $800,000–$900,000.
With Ms Cook and the Aldersons unable to reach a fair agreement, the dispute escalated to court.
In court, the Aldersons argued they only needed to return Ms Cook’s original contribution. However, the court disagreed. Justice Treston ordered the couple to repay her investment plus $120,000 and interest, noting the value of the Ormeau home had increased to $1.75 million.
Whilst Ms Cook was ultimately successful in her claim against her daughter and son-in-law, this case serves as a cautionary tale.
What is a granny flat arrangement?
Traditionally viewed as a self-contained unit on a family property, a granny flat arrangement refers to a broader living situation where an older person typically has the right to live in a home – or part of a home – that they do not legally own.
This could be a standalone build, a converted part of the main house, or even a new property purchased in a child’s name with financial contributions from the parent.
These arrangements are increasingly common as families try to pool resources to navigate Australia’s cost-of-living and housing crisis. For some, it’s a way to support ageing parents. For others, it’s a means of helping adult children struggling to afford a home. While the intentions are usually well-meaning, the outcomes aren’t always ideal.
Why establishing a formal agreement matters?
At Attwood Marshall Lawyers, we often hear from clients who assume their family would never fall into dispute. But time and again, we see the emotional and financial toll when arrangements go sour – particularly when parents contribute large sums without securing their rights.
A granny flat agreement is a formal, legally binding contract that outlines the terms of the arrangement, such as:
- Who owns the property, and what financial contributions have been made
- What happens if one party wants to leave the arrangement
- How funds will be returned if the home is sold
- Who is responsible for the maintenance and upkeep of the property
- Whether there are care obligations for the elderly parent
- What contingencies exist in case of illness, relationship breakdown, or death.
Without this agreement, parents risk losing not just their home – but their financial independence and legal recourse.
Centrelink and aged care implications
Granny flat agreements can impact aged care assessments and Centrelink entitlements. For older people considering a granny flat agreement, it’s essential to understand that if the contribution fails the complex reasonableness test Centrelink applies or the arrangement ends within five years and the move is deemed foreseeable, Centrelink may treat the contribution as a gift. This could affect both aged care fees and pension entitlements.
It’s critical to receive tailored legal and financial advice before deciding about granny flat arrangements and property transactions.
Can a granny flat arrangement impact my estate planning?
Granny flat arrangements can significantly affect your estate plan. If you transfer property or give money away during your lifetime, it’s no longer part of your estate and can’t be gifted in your Will.
It’s essential to update your Will to reflect the new arrangement. And if, for example, you’re gifting or transferring property to one child, you may need to adjust your estate plan to ensure other children or beneficiaries are treated fairly and provided for – both now and into the future.
Attwood Marshall Lawyers – helping you protect your family and plan for the future
Granny flat arrangements can offer many benefits, including closeness to your loved ones, having support nearby, and sharing expenses. However, to ensure everything runs smoothly, we strongly recommend all parties have open and honest discussions, clarify expectations around expenses and responsibilities, plan for the unexpected, and document everything in a written, legally binding agreement with professional legal advice.
As a full-service law firm with a dedicated Aged Care Department, we can guide your family though the process with compassion and clarity. Our team are Accredited Aged Care Professionals, recognised by Aged Care Steps as meeting the gold standard in aged care advisory.
For guidance on granny flat agreements, aged care planning, estate planning, an intergenerational property matters, please contact our Aged Care and Wills and Estates Department Manager, Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or free call 1800 621 071.
You can visit our experienced team at any of our conveniently located offices at Coolangatta, Robina Town Centre, Southport, Kingscliff, Brisbane, Sydney or Melbourne.
