Building a Granny Flat and moving in with family? A family agreement protects your intentions

April 20, 2023

You may find that living alone in your home does not work as you age. It may be important for you to be closer to your adult children for companionship and support. Living with children is a very common choice for older people, and for a variety of reasons.

A ‘granny flat arrangement’ is an arrangement between you and your adult child whereby you contribute to the cost of a property in exchange for living in the property. The project might involve building a separate dwelling on your child's property or renovating the existing one. In some cases, your family and you may have to sell your home and buy a new one. As part of the agreement, they may also provide you with support and care.

These arrangements often work out well, and there is often no doubt as to the good intentions when the agreement is entered into. However, you might run into problems if you have not taken into account what would happen if circumstances changed or if there is a dispute about what you and your family have decided.

While there is often no doubt as to the good intentions when the agreement is entered into, unforeseen problems often arise after new marriages or marriage breakdowns, which of course are never foreseen, or between siblings who deem an unfair balance in any potential estate that might be left.

Unprotected interests can lead to:

  • Your investment in the property being lost
  • The need to take legal action against your family to recover it.
  • The law considering you intended to give the money to your child without expecting a return
  • In a worst case scenario, you could end up homeless with your pension reduced.

Following a few key tips can help ensure your 'legal interest' in the property can be protected if the arrangement unexpectedly doesn't work out as planned. Additionally, they could help you avoid expensive and stressful legal action down the road.


Embrace the best case scenario, but prepare for the worst case scenario


To avoid misunderstandings down the road, make sure both you and your family understand what is being agreed. Taking into account what would happen if the arrangement no longer worked or if circumstances changed in the future are important.

Consider the following scenarios, for example:

  • The relationship between your child and their spouse or partner breaks down and the house has to be sold.
  • You start a new relationship and want to move out.
  • You need residential aged care because your health deteriorates.
  • Your health deteriorates and you'd rather stay put.
  • There's a rift between you and your child.

You should also think about:

  • What's the plan? Will this be a gift or a loan?
  • Does the property title need to be in both your and your kid's names?
  • In the event the arrangement does not work out and the property needs to be sold or you move out, will you be compensated for the contribution you made?
  • What method will you use to calculate your contribution?
  • What will the arrangement mean for your other children?
  • Is your family going to provide you with any personal care and support?
  • Do you have a will that specifies what will happen to the property if a member of the family dies unexpectedly?

The biggest benefit of discussing these, and other possibilities with your family and agreeing on what will happen will be that there will be less stress and less possibility of future disputes or legal action.


Write it down

Most people don't think to get legal advice or write down their agreements with family, but if money or property is involved, a formal agreement is always recommended - regardless of who is involved.

Its important for all parties to understand that having a formal agreement does not mean you don't trust your family and you should have a formal agreement even if you are confident that your relationship will not deteriorate.

Deal. Positive insurance broker handshaking with young couple after signing agreement contract

A formal agreement will ensure

  • ·You and your family will have a clearer understanding of each other's expectations and intentions. How the money you contribute will be used, for example
  • A loan or a gift. As well, you may have a very different idea of what support or care your family will provide than what you expect.
  • In the absence of a written agreement, Centrelink may consider your contribution a gift and reduce your pension.
  • In the event that the arrangement doesn't work out for one or both of you, it will help you and your family talk about what should be done.
  • A written agreement will help resolve any disagreements if there are ever any doubts about what was agreed.


Consult a lawyer


Your pension should be considered

Before you decide to move in with your family, you should seek independent legal advice. It means seeing a lawyer without your family present and speaking to the lawyer alone.

In addition to drafting an agreement, a lawyer can advise you on how to protect your interests. In the long run, getting this advice could save you much more money.

The granny flat agreement is a common piece of advice solicitors consult on, consider it a matter of course, just like to work with a solicitor when you buy a home. The pitfalls are well now and you can be assured that a good solicitor will not waste your time in helping set you up, for the cost of a few hours advice.

Pension entitlements may be affected by your granny flat arrangement. Granny flats are subject to special Centrelink rules and you should understand these clearly, seeking appropriate financial advice.

See also NSW Legal Aid

At Cubitt's, we focus on promoting choice for our clients. To achieve this, we deliver our service in collaborative and flexible way. If you are considering a Granny Flat as an option for your family, you are welcome to take your time browsing in our showrooms - bring in as many family members as you like, and see how comfy and spacious they can be - and of course talk to our team about how they can be customised to what you need.

This article was written by our Care Customer Specialist, Shayoni Shah. As our dedicated ambassador to those needing to understand what customisations and adaptations are required on a individual level, Shay has gone the extra mile to receive specialised training in providing exceptional support for customers who require extra care in their Granny Flat builds. Her expertise in accessible design and customer service will ensure a seamless and stress-free building experience for all client. If you'd like to speak to Shay when you call - simply ask for her, or email

Free On-Site Assessment at Your Property

Interested in finding out how to make a positive investment from a Cubitt's Granny Flat or Home Extension? Get in touch for a no-obligation site inspection today.

If you are looking to purchase a new property and want to do a Granny Flat Suitability Check - please use this form instead.

We require your name, email and phone number to get back to you - and the more you can tell us about your build project, the more effectively our local teams can help.


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