Granny Flats - What could go wrong?

Granny Flat Arrangements Gone Wrong - Flourentzou v Spink [2019] NSWCA 315

Mrs Spink made payments in the amount of $165,000 to her daughter and son-in-law towards the purchase and renovation of a property, under an arrangement where Mrs Spink would live in the house with her daughter, son-in-law and their children. The agreement was not recorded in writing, so when Mrs Spink was evicted by her family after a dispute, there was a disagreement about what the arrangement between her and her family was, and therefore, what amount of compensation, if any, Mrs Spink was entitled to. The legal question that needed to be answered first was whether the payments Mrs Spink had made were an outright gift to her family or whether there were conditions attached to the gift. Part of the renovation involved the building of a granny flat for Mrs Spink, who, after she moved in, did not make any contribution to rates, water rates, electricity and so on. The Court of first instance decided that the payments were made with the intention of obtaining the right of residence in the daughter’s property. Mrs Spink’s positive intention was inconsistent with the making of an outright gift. The daughter and her husband then appealed the case. The Appeal Court decided that there was an arrangement among the parties that Mrs Spink would live in a separate part of the house and that renovations would be undertaken both to create that area and to improve the house more generally. It further decided that Mrs Spink had made a gift, but one that “would ultimately take effect” only on her death. In the meantime, the daughter and her husband would have a duty to allow Mrs Spink to live in the property. The court found that the contribution did not constitute an early inheritance to the daughter and son-in-law. Th court ordered that the money be repaid to Mrs Spink. Commentary This granny flat arrangement gone wrong, thankfully, had a good outcome. What the case does not mention is how much money was spent by Mrs Spink or her family in fighting the court case. It would have been thousands of dollars and no doubt each side was left poorer for it. Had the parties entered into a contract prior to buying and renovating the house, and had Mrs Spink been able to secure her interest in the house, for example, by registering her interests in the property, the costs of attending to these things would have been far cheaper than a court battle, and less stressful.