When most people hear the words “granny flat” they think of a small self-contained dwelling in a backyard. While that is the real estate definition, a granny flat arrangement can apply to all or part of a home or a separate dwelling. Essentially, a granny flat arrangement gives you a right to occupy a property that you do not own for life.

The most common ways granny flat arrangements are created are: by the parents selling their home and paying for a granny flat to be built in the backyard of their children’s home, the children and parents both selling their homes and using the proceeds to buy a new home in the children’s name, or by the parents transferring their home for the right to live there or in another home under a granny flat arrangement.

There can be lots of excitement about creating a granny flat arrangement, but it’s important to have some........

© The Age