What are Granny Flat agreements?

If you are considering building a granny flat on a family member’s block as your primary place of residence and you do not intend to be on the title of the property, you should consider formalising your living arrangements.

A parent may enter into an arrangement when they are relatively healthy, but their health may deteriorate drastically and can place a toll on emotions, finances and lifestyle adjustments. Therefore, not only must the child who is party to the granny flat agreement be involved, but every family member in the household (example the child’s spouse) should be consulted about the arrangement as well. Siblings not living in the same household should also be consulted because it may be perceived that one child is receiving an advantage over another.

There are alternative ways to structure the agreement for a person to live at a property either for a specified period of time or until their death.

Life Tenancy

• LIFE TENANCY is a term used to describe ownership of an asset for the duration of a person’s life. The owner of a Life Estate is called a ‘life tenant’. They are the person occupying the granny flat. The life tenant has the right to possession and enjoyment of the asset until their death. Once the life tenant dies, ownership of the asset goes to the ‘remainderman’. The remainderman is the person or persons entitled to take the asset upon the termination of a Life Estate, which in this instance may be the owner of the property.

• A life tenancy is registered with the land titles registry and will appear on the title of the land.

Right to Reside

• A Right to Reside is an entitlement to occupy a property for either a specified time or for the life time of the beneficiary. The entitlement is normally subject to certain conditions such as, maintaining the property and paying property expenses. The grantee cannot lease the property nor is he or she entitled to receive income in relation to the property.

• A right to reside cannot be registered with the land titles registry and will not appear on the title for the land.

Granny flat agreements should not be entered into lightly. It is particularly important for the parent to obtain independent legal and financial advice given that so much is at stake.