If you have an elderly parent, you probably worry about the difficulty of looking out for them, particularly if they live some distance away. The spiralling cost of care can be another concern, especially if they become frail and less able to cope on their own.
A granny annex may seem like the perfect solution, letting you keep an eye on your loved one while they retain their sense of independence. However, as Susan Ward, a residential conveyancing expert with Mooney Everett Solicitors in Ormskirk, Lancashire explains, there are some things you should consider first.
Planning permission, do you need it?
Your must have all the necessary planning consents in place before starting work on your granny annex. If you do not, then the local planning authority could require you to remove it and return your home to its original state. Being unable to show the requisite consents may also cause problems when you come to sell your home.
The good news is that you may not need to apply for full planning permission. Depending on what you want to build, and where you live, you may be able to rely upon permitted development rights instead. A separate self-contained building in your garden is likely to need an application for full planning permission. However, a home extension, which satisfies other conditions relating to its height and physical layout, may not.
Unfortunately, this can be a complex area and it is a good idea to take expert advice early on before committing yourself financially or emotionally to your project. If there is any doubt over whether planning permission is required, your solicitor may suggest applying for a certificate of lawful development. This can give you peace of mind that your proposals are lawful from a planning perspective.
Your must have all the necessary planning consents in place before starting work on your granny annex.
What other consents will you need?
As well as planning, there may be other legal requirements that you need to comply with. For example, there may be restrictions in your title deeds which mean that any building works require the consent of an adjoining landowner, or some other third party. If your home is leasehold, then you will probably also need the consent of your landlord for any structural alterations. If your home is subject to a mortgage, you may need your lender’s consent too.
Failure to comply with these requirements could put your home at risk, so always discuss your plans with your solicitor. They can ensure that you obtain the right consents. Where this is not possible, they can advise you on how to protect yourself, for example, by taking out a suitable title insurance policy.
What about stamp duty land tax?
Building an annex should not ordinarily give rise to any liability for stamp duty land tax. However, stamp duty land tax will apply on any future sale of your property, affecting how attractive your home is to would-be buyers.
What about other taxes?
You should also consider the potential impact on liability for capital gains tax and inheritance tax. Tax legislation is complex and ever evolving, which is why you should discuss your individual circumstances and requirements with your professional advisers, ideally, in the context of wider estate planning.
For example, if your parent chooses to gift you some of their money, possibly from the sale proceeds of their house sale, this may reduce liability for inheritance tax in the future. However, HMRC will treat any such gift as a potentially exempt transfer. This means that if your parent dies within seven years of their gift, you may find yourself unexpectedly having to pay inheritance tax on that contribution. Depending on your circumstances and each parties’ intentions, there may be better, more tax efficient ways of structuring the arrangement.
Stamp duty land tax will apply on any future sale of your property.
What about finance and ownership?
Borrowing money to finance your annex may prove harder than you think, so consider your options early on. Many mortgage lenders will not lend on only a part interest in a property, whilst others have age restrictions on borrowers, making it harder to get a joint mortgage with mum or dad.
Whether borrowing or not, if you are combining finances with other family members, you should all be clear on the arrangement. Discuss your plans with your solicitor, who can advise you and ensure that there is a written agreement which reflects your true intentions. This should take account of your relative contributions and what could happen in the future. For example, what legal interest, if any, will your parent have in your shared home?
Joint ownership as tenants in common may seem like the obvious and fairest choice, because it would allow each of you to have a fixed share, reflecting your different contributions. However, if your parent dies, their share in the property will pass as per instructions left in their will if they have one, or according to the rules of intestacy. You could then find yourself sharing ownership of your home with their beneficiary, which may not be what you had in mind at all.
Your solicitor will help you to address some difficult questions now, such as what happens if one of you wants to move out, or dies, or if your parent needs to go into long-term care or loses mental capacity. It may not make for an easy conversation, but it can prevent some more serious problems in the future.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.