The Law Handbook 2024

886 Section 9: Health, wills and other legal issues affecting older people Using the family home as security or guaranteeing a loan Sometimes an older person agrees to use their home as security for the purchase of a home by one of their adult children. Often there is significant pressure for them to do this because of the difficulties younger people are facing in relation to home ownership. Banks may agree to loans but require the additional security of the family home. Issues to consider include: • If the mortgage is not paid by the adult child for any reason (e.g. illness, job loss, relationship breakdown, etc.), the family home is put at risk, as the older person is unlikely to be able to pay any outstanding and ongoing mortgage payments as they are likely to be on a fixed or limited income. • Changes to an older person’s assets may affect their pension entitlements. If you are considering going guarantor or using your home to secure a loan for a family member, seek independent legal and financial advice from a lawyer who is not the lawyer engaged by your adult child. Granny flat arrangements Older people sometimes decide to pay for the construction of a granny flat or self-contained unit on a child’s property. Issues to consider include: • Local councils have different requirements in relation to these types of structures. The financial implications of the construction of a granny flat can differ considerably depending on the legality of the structure and permit type. For example, a construction that does not have a permit may have to be pulled down or removed before the house can be sold. In this case, the granny flat has not added any value to the property. There are financial penalties for building without a permit: up to 500 penalty units (s 16(1) Building Act 1993 (Vic)). (See ‘A note about penalty units’ at the start of this book.) • If the council only allows the construction of a ‘dependent person’s unit’, the unit cannot be used for other purposes (e.g. as rental accommodation). As such, its value may be considerably less than what it actually cost to build it. If the relationship sours and the older person seeks to leave and take with them the value they added to the property, this may be considerably less than the construction costs. These types of issues should be thoroughly researched prior to commencing building. • If the relationship sours, or the older person needs to move into a facility with a higher level of care, they are unlikely to recover the money they spent on building a unit. These units are hard to sell as the removal costs are significant, making the purchase of a second-hand unit an unattractive proposition to potential buyers. In November 2023, the Victorian government announced that from December 2023, small second homes under 60 square metres, also known as granny flats, would no longer require a planning permit on properties 300 square metres or larger where there are no flooding or environmental overlays, lifting the burden of getting planning approval. Redress for failed assets for care arrangements When any of the above scenarios fail, the older person can be left with no funds, no home, and a soured relationship with family members. However, in some cases, there are legal avenues for redress. Often, the older person may not have a legal interest in the property because they are not on the title. However, depending on the circumstances, the older person may have what is known as ‘an equitable interest in the property’. This means that the law might see that in good conscience, the older person’s claim should be recognised in part or in full. However, there are many requirements that need to be met. Legal advice should be sought as soon as possible to pursue that interest. Legal action to recover funds can be complex and could involve, if the dispute is between co-owners, applying to the Building and Property List at the Victorian Civil and Administrative Tribunal ( VCAT ) (see ‘Contacts’ at the end of this chapter). Other scenarios may require action through the County Court or the Supreme Court, which can be more complex and costly. If relevant, a caveat claiming an equitable interest should be lodged as a protection from any unilateral action by the title holder, such as selling the property or refinancing the mortgage (s 89 Transfer of Land Act 1958 (Vic)). A caveat remains in place on the title until it is withdrawn by the caveator. Thus, it can provide an incentive to an adult child who wants to sell the property to settle the matter with the older