Granny flats

From: J Parker


Anyone who has bought houses with granny flats attached may be able to help me with the following:

1. How are such properties handled when it comes to rates, water usage etc? Would both house and flat normally be on separate titles?

2. Do I have to separately insure them, seeing as I'm getting two lots of tenants?

3. How do you handle the backyard space? ie; how much of it each tenant is entitled to? ( seems silly I know but surely both parties would be entitled to separate space?)

Going into this with no prior experience of this type of property. Any advice appreciated. Thanks all!
Cheers, Jacque :)
 
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Reply: 1
From: Regina Regina hoeppner


I am just going through the same experience.
I've decided to charge the bungalow tenant a flat all inclusive rent and offer the main house tenants a 15% rebate on gas and electricity, as the lines aren't separate. I haven't fenced of yet, but will consider at the tenants request. we are putting in a separate clothes line for the main house.
There is a separate storage area in the garage for the bungalow tenant, which he can lock up. if it works out, the rental return will be quite lucrative.
 
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Reply: 1.1
From: Michael Croft


Hi Guys,

I've posted on this somewhere before but can't remember where - But after some 750 posts on the new forum I think I need my own index!

Back yard space depends on the property, is it: an over/under with access front and back, a side by side, or a detached granny flat. All are treated on a case by case basis, but assuming it is the 'classic' free standing granny flat I provide a screen wall aka fenced area for the flat and a clothes line. I often incorporate a pergola into the fence as it forms their 'private open space'.

If they are on one title I insure them as one and notify the insurer of the two (or more) tenancies. Better check your situation with your insurer though.

Unless they are strata titled they have one set of rates and taxes. For electricity I always have them separately metered and ditto for gas - this varies from authority to authority. For example one electricity supplier will install a separate meter on request, another will only do it if there are separate Hot Water Services to the dwellings.

With the excess water and single billing I portion it out on a room basis. eg, if the main house has 3 bedrooms and the flat has one, the house pays for 75% of the water bill. This is explained and written into the lease.

Michael Croft
 
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Reply: 1.1.1
From: Kristine .


G'day

If the flat is truly a 'Granny Flat', then the original planning permit may state that it is for occupation by a dependent member of the householders' family only. The permit may contain a provision that the flat be removed when no longer used for that purpose.

This is so no 'de facto' subdivisions based on lease occur ie you can draw a line and lease a portion of a property, whereas an actual title subdivision may not be possible.

De facto lease subdivisions can create 'shanty towns', something which no municipality wants.

If the property is not separately metred, then the 'granny flat' provisions probably apply.

Check the permit before you buy, as you may find yourself with a removal order, just as with any 'illegal' extensions, and the municipality certainly has the authority to require you to comply with the terms of the original permit.

There is no substitute for thoroughly reading all the information in the Vendor's Statement (S.32 in Victoria) and doing further searches eg paying a few dollars and getting official copies of all building plans from the local municipality. Do not rely on heresay, or you may find yourself demolishing the flat or other parts of a property, for which you have paid good money and with no hope of recompense.

Other than that, Good Luck!

Kristine
 
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Reply: 1.1.1.1
From: J Parker


Thankyou very much Kristine and Michael! Your experience and helpfulness is much appreciated. At least I now know what questions to ask the r.e.agent.
Cheers, Jacque :)
 
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Reply: 1.1.1.1.1
From: Crystal .


Hi Jacque,
If you do not install a water meter for the granny flat, you cannot charge the tenants for water. My brother had one installed last week for $120.
Separate electrical meters vary in cost. The electricity meters ensure that each tenant gets their own bill which has nothing to do with the council - in case you did not want the council to know you were separately tenanting.
The water meter needs to be read by you or your property manager and the bill apportioned according to use.
Please note that this information is relevant to my area of investing and may be different in different council areas.
I always fence between the two dwellings for maximum rent and privacy and only buy house and granny flats with separate entrances. eg corner block or rear lane.
Kind Regards,
Crystal
 
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Reply: 1.1.1.1.1.1
From: Michael Croft


To add to Crystal's post.

Water meters are generally administered by council (if not part of the SMWB or in Sydney) and when you apply for a second meter they want to know why. This requires you to explain about the second tenancy and at best up goes the rates and taxes (for the second dwelling)or worse they require a strata/unit titling to take place which may not be possible.

This could leave you in the situation, as mentioned by Kristine, of having to remove said second dwelling - plays havoc with the $$ returns ;-)

Michael Croft
 
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Reply: 1.1.1.1.1.1.1
From: Crystal .


Hi Michael and all,
You can purchase a water meter from your local plumbing store and have it installed between the house and the granny flat. This meter is not from the council, it just measures how many kilolitres the granny flat has used, which would be subtracted from the total kilolitres consumed with the remaining kls charged to the tenants in the house.
Your property manager can check the meter and calculate this for you.
The water board is happy because the single water bill is paid and your tenants are (hopefully) happy because the bill is apportioned according to actual usage.
Hope this helps,
Crystal
 
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Reply: 1.1.1.1.1.1.1.1
From: Michael Croft


Hi Crystal,

There are some cases where there the separate meters are impractical or cost prohibitive. One of ours has the classic concrete front yard and paths surrounding the house. The pipes are under concrete somewhere, the concrete has steel reinforcing in it so locating the pipes is near impossible. If one could find the pipes it would be a big mess to expose them for a secondary meter.

Another is a cavity brick house converted into 4 units. The pipes run in the cavity and it would require a major reworking ($$$) of them to install the meters.

In short what I've found is that the per room percentage split has always worked for me provided it is explained up front to the tenant and included in the lease. It is not unlike the unit entitlement of a body corp. My standard dual/tri occs have separate metres. As few as 10 years ago I didn't bother as water consumption charges were insignificant.

In my area a secondary meter costs about $120 and a tame plumber will install it for +/- $50.

regards, Michael Croft
 
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Reply: 1.1.1.1.1.1.1.2
From: Owen .


Crystal,


Dumb question number 1)

If I am the landlord and am receiving the water bill, how do I physically bill the tenants for the usage? Do I pay the total and send a copy to the tenant and wait for cheque or can the water board split the bill and send it to 2 addresses?

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.1.1.1.1.1.1.2.1
From: Crystal .


Hi Michael,
I wasn't aware of all the difficulties that can arise but you certainly know how to *think outside the square* and overcome them.

My property manager notified me about the water charges clause in the NSW Renting Guide...

"A tenant can only be charged for the metered amount of water which they use. For this reason it is important that the water meter be read and the figure noted on the premises condition report before the start of each tenancy. Otherwise there will be no way of dividing the first account between the tenant and the former occupant.
"If there is no individual meter for the rented premises, as is the case with most blocks of units, a tenant cannot be charged for water usage. If the supply authority has a minimum amount payable for all properties the tenant does not have to pay for water."

My property manager therefore advised me to install water meters if I wanted to charge for water usage.

Owen,
In answer to your question (it wasn't dumb) Yes, I will pay the total and send a copy to the tenants and wait for cheques.

Kind Regards
Crystal
 
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Reply: 1.1.1.1.1.1.1.2.1.1
From: Michael Croft


Thanks Crystal,
It would appear I am breaking the law in Sydney in a couple of cases ;-) I'll have to rectify that when the tenancies change.

Elsewhere it seems to be OK.

Michael Croft
 
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Reply: 1.1.1.1.1.1.1.2.1.2
From: Owen .


Thanks Crystal. I was just thinking of re-posting the question as I thought it got lost in the thread.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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