Promises become property problems

Pending the birth of their first child, Peter and Jane were staying with Jane’s mother, Betty.

At the time, Betty was involved in a difficult divorce with her husband.

They agree that if Peter and Jane help Betty with finance, they can retain the home and in return they would be registered on title. As the family grew, Betty was to move into the granny flat, which required substantial renovations.

The property is refinanced and Peter and Jane begin working on the granny flat.

As part of the refinance, Peter and Jane are registered on title as to 10% each.

Unfortunately, a few years later, following an argument between Peter and Betty, their relationship breaks down.

Peter and Jane say that they are entitled to compensation for the work they have done on the property and say that they are also each entitled to a 1/3 interest in the property, as per promises that they say Betty made to them during the course of the refinance.

Betty denies that there was any binding arrangement regarding the 1/3 interests and says that the improvements that Peter and Jane made to the property were substandard.

The parties are unable to resolve their differences and the matter proceeds to determination by the Supreme Court.

The Court hears evidence from the parties regarding the alleged arrangement between them and conducts a careful analysis of the improvements that Peter and Jane say they made as well as the financial contributions regarding mortgage repayments and the payment of outgoings such as council rates and insurance.

Ultimately, the Court decides that Peter and Jane are not entitled to more than the 10% that they each hold as registered proprietors and that their improvements to the property do not constitute a basis for an increase. The Court does however recognise that Peter and Jane made contributions towards the repayment of the mortgage which entitles them to an additional 1% share of the property.

This case demonstrates the importance of formally documenting family arrangements, particularly involving real estate.

This fictional column is not legal advice.