Reasons why (and why not) to share the home

The very term “granny flat” says it all really – the idea of a sweet old lady going to live with one of her devoted children in a cosy space of her own, safe and secure, grandchildren at her knee. But just how often does the reality fit the popular image?

Paul Christensen loves being a live-in grandfather. Single since his divorce many years ago he recently sold his home and moved in with his son’s family.

“Best thing I could have done,” says Paul, adding that interacting with his three teenage grandchildren keeps him young. “I had a house that was too big for me and expensive to run, they have a large house with a guest suite they don’t need.  Works for all of us.”

Gabrielle Peake also sold her home and moved in with one of her children, but in her case it didn’t work out so well.

Her main reason for moving was that her health was deteriorating, she was no longer able to drive and she thought she could count on family support in her old age.

She put her money into building a small extension to the already-large house to give herself independent living – but did not bother with any sort of legal agreement.

At first all was well, but the house was in the country, a long way from shops and Gabrielle’s old friends and community – so she was dependent on family members for transport.

“When they suggested I move in with them they told me this wouldn’t be a problem,” Gabrielle says now. “But soon they began to begrudge running me around.  And they were away a lot, leaving me isolated.”

Then her daughter and husband divorced, the house was sold and Gabrielle’s investment was not recognised, nor legally provable. So, without sufficient money to buy another home she now rents a unit back in her old community – and is increasingly dependent on government assistance.

Despite the obvious risks, many older Australians choose to live out their final years in granny flats – as many as one in five according to a University of New South Wales study.

This is particularly the case for those who, through death or divorce, find themselves alone. The benefits can be financial, such as selling your home and downsizing to a small dwelling, thus freeing up capital and/or making your pension/retirement income go further. Or social, such as being close to your grandchildren and having family to care for you in-house in your older age.

Multi-generational living was the way we lived up until a century or so ago and its appeal – and advantages – have never quite died out even with the emergence of the financially affluent nuclear family.

Problems can arise when one or other of the parties involved wants to end the arrangement. This might be because of remarriage by either party, financial difficulties or any other reason leading to the sale of the main house, the ageing parent/s needing residential age care facilities, or just the constant friction that can occur when more than one generation is sharing a living space.

One person interviewed for this article said that he opted out when his son and wife decided to go overseas for a year and let their shared home to strangers.

Another said she’d been happy in her granny flat while her grandchildren were small but when they became teenagers they were noisy, inconsiderate and kept borrowing her car.

The bottom line is that however close the family ties, anyone contemplating a granny flat arrangement should get legal advice and put a signed, legally-binding agreement in place so that all interests are properly protected.

This is vital if you (as the parent) have contributed funds to create a granny flat situation, either by modifying a home, adding to it or buying a suitable property in your children’s name, in return for a lifetime right to live there. Or even selling/gifting your home to your children and retaining the right to continue living there in your own quarters.

Your financial interest must be safeguarded because, if things go wrong, you may lose everything.  Only lawyers win when a granny flat arrangement turns sour enough to end up in court!

And it works both ways. If you have entered such an arrangement with your own parents then you need legal safeguards in place to ensure that all future issues – fair division of capital gain on the property if sold, tax implications, financial implications for siblings when your parents die – are in place.

Informal granny flat arrangements are based on love and trust but too often lead to misunderstandings and disputes that can tear a family apart.

The Federal Government now allows capital gains tax exemption for granny flat agreements – another reason to make sure that your arrangement is legally sound. This is likely to bring about a building boom in new granny flat construction and also deliver a better social outcome by allowing elderly parents to move in with their children without incurring capital gains tax on the family home.

For those on the pension, Centrelink uses the term “granny flat interest” to define the agreement for accommodation for life between aged parents and adult children and allows pensioners to contribute more than the usual gifting limits of $10,00 a year and up to $30,000 over five years.

This applies to those who pay to build a flat or addition on to an existing property which will become the donor’s principal residence in which they have a life interest or life tenancy. However, there are issues here regarding the pensioner’s status as tenant or home owner and so before taking to a lawyer it’s wise to talk to Centrelink’s financial investment service.

The good news for those contemplating an inter-generational living arrangement is that today’s granny flats offer a multitude of very attractive choices when it comes to putting up a separate building in the backyard. Or even attaching it to the main house.

Some building companies actually specialise in designing and constructing small, fully self-contained homes featuring modifications for the elderly and/or physically challenged. Movable units with the same features are also available.

Of course, there are regulations to consider and in Queensland these are mainly the province of local authorities.  Brisbane City Council, for example, requires a development application for any “granny flat” bigger than 80sqm and more than 20m from the main house.

And while it is true that most councils don’t require a development application as such if the separate building/extension is for a relative, it must still comply with the building code.

So you must check local authority requirements before you proceed.

Not all shared living involves putting up a building in the backyard. Alison Brownlie, who has a unit in Brisbane and, until recently, another in Maroochydore, sold one and bought a third share in a 40ha property, with her daughter and partner who could not have done this without Alison’s investment.

The young couple live in an old house on the property which they are renovating and extending at their expense while Alison is building her own cottage and paying for this herself.

Rates and electricity bills are shared three ways.

Alison has the pleasure of growing up close to her granddaughter and being able to help out with babysitting when needed. She has more safety and security as she ages than she would have had living alone, but is also free to travel, knowing that her home and cat will be looked after while she is away.

Inge Madsen has a similar arrangement but in her case she bought the property, a house on half a hectare, when her marriage broke up years ago.

Her son continued to live with her after he married and later built a second house, at his own expense, for himself and his growing family while Inge continues to live in the “old” house.

He, his wife and Inge all now have their names on the title deed.

“They take care of the grounds now that I am getting older,” says Inge, 76.

“And in the past I’ve helped out with baby sitting and a bit of cooking now and then.  It’s worked well for years. We lead quite separate lives but are always there for each other when needed”.

Aged care consultant Carol Bradley Bursack quotes research on ageing and quality of life which shows that only 31 per cent of aged parents want to live with their adult children, though more than 50 per cent of adult children say they’d be happy with this arrangement.

In southeast Queensland we are lucky enough to have many accommodations options for older people who want to live out their lives with independence, security, comfort and privacy.

We are also lucky enough to have enough suburban space for those who choose the multi-generational option, luckier still that this is not usually forced on us by financial necessity. Australia is, after all, still the lucky country.

Yet for some it does make good financial sense to share a home in which two or more generations can also share the benefits of helping each other and enjoy a close, rich, loving family life – provided there are ground rules in place for cost sharing, privacy and mutual respect for the needs of the different age groups involved.

This is where the granny flat comes into its own.