Granny Flat Agreements: Security, Clarity, and Peace of Mind for Families
What is a granny flat agreement?
A granny flat agreement is a formal, written arrangement that sets out the terms on which an older person (often a parent) contributes money, assets, or the proceeds of a home in exchange for a right to reside in a separate dwelling or part of a family member’s home for life (or a specified period).
In practice, the “granny flat interest” is recognised for social security purposes under the Social Security Act 1991 (Cth) and Centrelink policy. In NSW, certain transfers to create a qualifying granny flat interest may be exempt from stamp duty under the Duties Act 1997 (NSW) when strict criteria are met. The detail matters—this is not a DIY exercise.
Why put it in writing?
Verbal family arrangements are common—and commonly disputed. A clear written agreement:
Defines the interest (life interest, right to reside, licence—what exactly is the older person receiving?).
Protects contributions (how much is paid, to whom, when, and what happens if plans change).
Clarifies responsibilities (maintenance, utilities, rates, improvements, insurance).
Sets an exit plan (if care needs escalate, the relationship breaks down, or the property must be sold).
Supports Centrelink assessments (avoiding “deprivation” or gifting issues and unwanted means-testing outcomes).
Reduces risk of estate disputes (aligns with wills, powers of attorney, and family expectations).
Key legal and practical issues to cover
1) The elder’s interest and security of tenure
Will it be a life interest, a right to reside, or a licence? Each has different consequences for control, sale of the property, and what happens if family circumstances change.
2) Contributions and valuation
Document cash contributions, in-kind contributions (e.g. construction costs), and how the value is calculated. Centrelink applies a reasonableness test—get advice to avoid an inadvertent “gift”.
3) Title and stamp duty
If title is transferred or created, confirm whether a duty exemption applies and ensure documents are prepared to the Duties Act 1997 (NSW) requirements. Lodging incomplete paperwork can be expensive.
4) Exit, sale and repayment formula
Life is unpredictable. Build in triggers and a repayment mechanism (e.g. a percentage of sale price or indexed amount) if the elder moves to aged care, the relationship breaks down, or the property must be sold.
5) Insurance, maintenance and upgrades
Who insures the dwelling? Who pays for repairs, modifications, or accessibility works? Spell it out to avoid friction.
6) Care expectations (and limits)
Be realistic. Clarify what support is expected (meals, transport, personal care) and when external help or home-care packages will be engaged.
7) Align with estate planning
Update wills, enduring powers of attorney, and enduring guardian appointments so the agreement and the estate plan work together. Otherwise, you risk family provision claims and confusion later.
8) Safeguards against elder abuse
Independent legal advice for the older person is essential. Consider medical capacity assessments where appropriate and ensure the agreement is truly voluntary.
Common mistakes we see (and fix)
Relying on a handshake deal—nothing in writing until there’s a dispute.
Paying a large sum without documenting the granny flat interest—triggering Centrelink “gifting” problems.
Forgetting the exit plan—no formula for repayment if aged care becomes necessary.
Not updating estate planning—leading to unintended outcomes or sibling disputes.
Assuming a stamp duty exemption applies—without meeting the technical criteria.
A quick checklist before you commit
Independent legal advice for all parties
Clear definition of the interest (life interest/right to reside/licence)
Documented contribution and valuation method
Exit triggers and repayment formula
Insurance, maintenance and costs allocation
Alignment with wills, powers of attorney and guardianship
Centrelink and taxation advice where needed
Duty/land titles compliance in NSW
Why choose a bespoke agreement?
Every family is different. A templated document won’t capture your property, your finances, your care needs, and your family dynamics. A bespoke granny flat agreement protects relationships and assets, supports Centrelink compliance, and gives everyone certainty.
Speak with our granny flat specialist
If you’re exploring a granny flat arrangement—or need to review one already in place—contact Kristy Hatcher at Renee Roumanos Legal. Kristy works with families to design practical, compassionate, and compliant agreements that stand the test of time.
📩 Ready to talk? Reach out to Kristy Hatcher at Renee Roumanos Legal to book a confidential chat and get clear, tailored advice before you commit.
