Granny flat or an extra income

Life changes and sometimes so does an extended family's housing needs. Perhaps granny can no longer live at home and a rest home doesn't cut it. Or the kids and their offspring might be coming back from overseas and you need more bedrooms, or a home and income-style property.

For some people it's more cost-effective to keep the same house and extend to create more rooms, or alter walls to reconfigure the living spaces. This can add value to the home.

Daniel Coulson, national residential manager at Bayleys, says when planning alterations it's important to consider the living space needs of the intended resident.

"A home and income is a residence which has been adapted with full council consent to operate as a separate abode," says Coulson. It could be separate from the main house or part of the footprint, but it will have its own electricity, water and other services.

A granny flat might look much the same, but it isn't legally permitted to be let as a second flat. That's fine if it's used in effect as an extra bedroom under the same roof.

It can't be let legally under the Residential Tenancies Act because it lacks the consent needed.

Coulson says that when scoping out the building parameters, you have to think about the needs of who will be living there. Does the intended resident need a dining room, a kitchenette, lounge, bathroom and toilet?

"It's important to employ professional consultants in conjunction with a builder to look at whether any further council consents are required to convert the space," says Coulson.

If you want to let the property at a later date to earn income from it you will require a higher level of council consenting for an "income unit" compared to that needed for a granny flat.

"Also think about access to the secondary dwelling. Will the granny flat or unit have its own entrance and separate car parking space?"

Coulson says anyone who wants to develop a home and income or granny flat space should talk to their insurance company about the implications.

If not, there is a risk of claims being declined for non-disclosure.

"Some insurance companies require that there is no hard-wiring of a stove in the kitchen area of a granny flat unit which will limit the scope of its usability," says Coulson.

If you're shopping for a new home to meet your needs it's important to understand the legal differences between a home and income property and a granny flat, he says.

"They may serve the same purpose -- but they are fundamentally very different entities," Coulson says.