Whether we like it or not, our parents get older and at some stage or another are going to have to move into accommodation which suits their changing needs. It is widely recognised that South Africa has a major shortage of retirement accommodation and even if someone is lucky enough to secure a home in a retirement complex or old age home, the cost of such a luxury is generally high.
The granny flat option has always been a popular choice in this country, and for good reason. Having your parents living in close proximity not only saves money, but ensures that their needs – and your peace of mind - are taken care of.
There are some financial benefits too as generally speaking, a granny flat adds value to a property in the long term. With all of these perks one could assume that the decision to house one's parents on the property is a win-win situation. However, there are drawbacks and implications that need to be considered before committing to the idea.
On the emotional side of things, living with an older person, particularly if there are a number of different generations already living under one roof, can be problematic. For this reason it is vital to establish a few ground rules before the parent or parents move in. Privacy is often a major problem and as important as it is for the younger generation to be left to get on with their own lives, it is equally important that the rights of the older person are respected. Interfering in one another’s lives is also a no-no and again, boundaries need to be set before the parents move in.
The ramifications of the decision, however, do not rest solely on emotional issues and the financial aspect plays an enormous role. It is all very well for a parent to invest their hard earned pensions into someone else’s property, however, they do not have secure right in the property and be will regarded as concurrent creditors, ranking behind the mortgage bond holder, unless they become joint owners and their name appears the title deed. While the idea of living with children may appeal in the beginning, things don’t always work out. The parent's health, for example may decline, the children may be forced to sell for financial reasons or in perhaps the worst case scenario, decide to sell up and emigrate.
More often than not, the parent will assume that once the property is sold, they will get a good return or at least recoup their capital outlay. This, unfortunately, is not always the case. The South African property market has just come out of one of the toughest recessions in living memory and in many areas property prices have fallen through the floor. Although improvements and additions generally add value to a property in the long term, this rule is not set in stone and there have been many instances where homeowners have suffered a loss.
The other aspect that needs to be carefully considered and discussed with both the parents and other siblings in the family is what happens in the event of the death of the parent? If the will is worded in such a way that the estate is to be divided equally among the children, what happens to the money the parent invested in the granny flat? Would the other children expect the homeowner to either sell the property to reimburse them or perhaps find other ways of accumulating the cash to pay out the money the parents invested in the property?
In order to prevent any of the above becoming a major issue, it is advisable to consult with an attorney before embarking on such projects. It is also prudent to discuss all the aspects of the deal with the parents and all other family members. Getting your house in order before the first brick is laid could save you and your family a great deal of heartache.