Mother funding granny annex build on our house - what should we consider/what is fair

[knakered]

My mother is considering funding building a granny annex on our house for her to live in. How can we make sure that all is fair and square and that "exit strategies" are considered up front. Our house is worth £850k but with a £200K injection for development could be valued at say £1.4m. My Mum is recently divorced and has no income but a lump sum £300K which will only buy a flat where we live - we have discussed that she spends say £100k on a granny annex then use her other £200k to buy a buy to let so that she has an income.
Can anyone see any pit falls with this?...what would be fair if she wanted her money back out?...% of the growth in value of the house or capital+interest?...I am one of 7..so in theory she could gift me £40k of my "inheritance" now...but I would feel cheeky asking her to do this...what is fair?

IMHO, it's best to do it at strictly arms-length terms with each party independently advised so you're not just being fair, your're being seen to be fair. Otherwise, you're building up trouble with your siblings for the future if they think (rightly or wrongly) that you have benefited from your mother's estate at their expense.

If you're going to go ahead, I would agree in principle either:
(a) a loan of whatever she puts in plus commercial interest, secured against the property and maybe give her a 90-year lease of the granny annex at a peppercorn/low rent in lieu of getting repayments each month, or
(b) to get a valuer to work out together approximately what value is added to the property as a proportion of its value after her cash injection. You should be able to work out what share in the property is equitable to give her after the cash investment (and TBH if you can't agree what shares you're entitled to, then her moving in is a non-starter).

Then you need to get a Solicitor to draw up a trust deed and to register it against the property so if any of you goes bankrupt/dies etc. the position is clear to any trustee in bankruptcy/heirs.

Good luck - you are v. sensible to consider the probs from the outset .