‘I live rent-free in a friend’s unit. If he dies, can his wife or kids kick me out?

Q: I am about to rent out my large house out and move into a smaller unit that a close friend is prepared to let me live in rent-free for life as long as I pay utilities and upkeep and help him with his chores. My question is, should he pass away, could his children, who will eventually inherit the unit, or his legal wife, from whom he separated 15 years ago with a property settlement, somehow evict me from the unit? He is prepared to amend his will that I might live in the unit until such time as my death or by mutual agreement.

A: That’s a good friend indeed. There are two ways of protecting your right to live in his unit:

1. He grants to you now, while he is still alive, a life interest in his unit or
2. He gives you a life interest in the unit in his will.

If the arrangement is to start now, the best way is number one and this should be properly documented between you and him. That way, the executors of his will would have to recognise your right and would not be able to sell the home or force you to leave until your right expired e.g., you expired or you left for some other reason. In Queensland, you can register a life interest on the title deed, just like a mortgage, which is even better protection.

The problem with number two is that you would have to rely upon him making such a will and then not changing it.

I am concerned about the capital gains tax and Centrelink implications of renting out your home, however, but not knowing about your broader financial circumstances, I would strongly advise you not to do anything about the proposal until you received good financial and legal advice.