A right to occupy property (also referred to as a “right of residence”) is where a property owner grants someone the right to reside in a property after the owner passes away. It is usually rent free and for a specific period or until the occurrence of an event (e.g. the person granted the right of residence dies or remarries).
A right of residence does not give legal title to the person: the owner retains ownership. It is different from a life interest which often provides a more flexible, more formal right of occupancy to a specific property (and sometimes to subsequent properties).
These arrangements are most often created under a Will and come into effect when the Will-maker has died.
What is a right to occupy?
A right to occupy in a Will grants a person (e.g. child, spouse, friend) the right to live in a specified property. It is a personal right which does not transfer legal title of the property. It may be used where the Will-maker wants a loved one to remain living in a property for a specified period or until the occurrence of an event.
How does a right to occupy work?
A right to occupy or a right of residence is usually created by a Will.
The executor is responsible for facilitating any gifts under the Will, including a right of residence or life estate.
A right of residence usually ends on a set date, on the occupant’s death, or on remarriage, though other conditions can be incorporated. Once the estate has been finalised, the responsibility for administering the right of residence passes from the executor to the trustee (who may or may not be the same person). Thereafter, the trustee manages compliance and protects the interests of the beneficiaries who will take the property once the right of residence ends.
Key legal conditions and considerations
A clear and well drafted Will can reduce ambiguity and disputes.
A right to reside is personal to the named person and cannot be transferred. It can also be subject to conditions, including that the occupant must:
- pay maintenance and insurance;
- keep the property in good order and allow access for inspection; and
- not sub-let the property.
Restrictions on use of property
A right of residence may be subject to conditions prohibiting major renovations without trustee approval, using the home as an investment, sub-letting, or any changes to the title or mortgage. These property rights under a Will are enforced by the executor or trustee. They can issue notices and (if required) ask the court for advice or to resolve a dispute.
Occupant’s responsibilities
The occupant is usually responsible for paying the day-to-day costs such as:
- Routine maintenance and gardening;
- Council rates and water charges;
- Home and contents insurance; and
- Utilities.
Uncertainty over who is liable to pay the above expenses can lead to disputes. It is important that the Will sets out who pays what and when.
Life interest vs right to occupy: what’s the difference?
Right to occupy: personal right to live in the home, generally no right to let or sublet the property or to access capital, non-transferable.
Life interest: broader control under a trust, may allow sale and the rollover of the sale proceeds into a subsequent property, may allow renting.
Which option is suitable for you will depend on your circumstances.
Resolving disputes
Vague Will clauses can increase the risk of disputes
Situations in which disputes may arise include where:
- the will is unclear as who pays what
- the beneficiaries want an early sale, and
- the beneficiaries believe the person with the right of residence has breached a condition.
Resolution options include:
- Negotiations;
- Mediation; and
- Application to the Supreme Court of NSW for directions or relief.
Drafting a right to occupy clause
- Be specific. Name the property, who pays what costs, start date, duration, and termination events.
- Clearly set out any terms or conditions such as required maintenance standards, insurance levels, inspection rights, and rental bans.
Here to Help
Contact us for guidance on property rights under a Will, conditional occupancy in Wills, and disputes over the right to occupy. Our estate planning services include advising executors and trustees, drafting a right of residence or a life estate, and helping to resolve Wills and estates disputes.
