Older people are at risk of homelessness if their ‘granny flat’ agreement falls flat, a leading law academic has warned.
Macquarie University associate law lecturer and PhD student Teresa Somes says family care arrangements – where older parents give their assets to their adult children in exchange for accommodation and care – are becoming increasingly common, but can backfire with serious consequences for parents.
Her research shows most people fail to seek any legal advice prior to entering these arrangements or set up a plane in case they do fail.
“Such failures can occur through the breakdown of relationships, or events such as divorce, bankruptcy or the increasing care requirements of the older person which the adult child can’t fulfil,” she says.
“People can enter into these agreements very quickly, if someone’s been widowed or they’ve had a fall, and they don’t want to spend the money going to a lawyer and they think they’re okay because it’s family, and they can trust them. It’s a bit like a prenup agreement, and that question of, ‘why would you have one? Because that suggests you don’t trust me’.”
If these arrangements do fold, her research shows parents can end up homeless or dependent on social housing or friends for accommodation.
In one recent case in the Supreme Court of NSW, a woman was left staying with friends or “couch surfing” – after the relationship with her daughter and son-in-law soured and she was asked to leave the home – to which she had contributed nearly $170,000.
While cases that reach the Supreme Court generally rule in the parent’s favour, a three-day hearing can cost between $90,000 and $130,000, a hugely expensive – and stressful – exercise – and many never make it to the courts.
Ms Somes is advocating for easier legal avenues for these disputes to be resolved – but says the easiest way to avoid them is to set up a legally binding contract.
There’s also the alternative – make your own plans now for where you want to live in retirement.
There are plenty of retirement living options that provide a continuum of care – so if you do need extra support as you age, there are services available.
You can learn more about different housing choices at villages.com.au.
