Legal top tips when building a granny annex

Building a granny annex can seem a perfect solution to many families; not only is it a way of consolidating family assets and passing on wealth but it also provides an immediate solution to childcare and a longer term plan for caring for elderly parents. However, before embarking on this project it is important that you consider and avoid the potential pitfalls!

Disputes about ownership further down the line are unfortunately common and so it is essential that the arrangements are properly documented and legal advice is obtained. If you are combining finances with other family members then it is important that this is properly documented. If, for example, it is intended that the property will be owned jointly, as tenants in common, consideration needs to be given to what happens after your parent dies and to the terms of their Will. If the Will provides for your parent’s share to pass to someone other than you, you may find yourself sharing the ownership of your home with their beneficiary.

If you need to borrow money to finance the building of an annex, you may find it difficult to get a joint mortgage with an elderly parent if the property is jointly owned. Again, you will need advice as to how to structure ownership to get around this problem and avoid potential disputes in the future. Whilst the idea of a dispute with mum or dad or dad may seem inconceivable, disputes over a deceased’s estate are, sadly, increasingly common. You also should take steps to limit the risks to your new shared home in the event of somebody moving out because of a relationship breakdown and a subsequent claim for a share of the property. There is also a risk if one owner is declared bankrupt, either you or your parent, that the property may have to be sold.

It is also important to think about how the new living arrangements will work financially: for example, how are bills going to be shared and who is going to pay for works? A simple family agreement may be a good way of recording what you have agreed. At the same time, you should be thinking about the tax implications, reviewing Wills and putting in place Lasting Powers of Attorney dealing with property and finances and personal welfare matters.

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