What price is your home? – Home owners and care home fees

Moral and ethical questions surrounding the business of providing care homes have been under a great deal of scrutiny recently. The issue that has not been discussed, but is likely to become increasingly pertinent for many is the recovery of unpaid care home fees.  This issue concerns struggling care providers, local authorities as well as residents and their family members, especially those who take steps which they believe are in the resident’s best interest (as a power of attorney or otherwise). Many residents have benefitted from the ‘good times’ and own their own home as a result.  Hence, a move to a care home is likely to involve a decision about what to do with the family home and awareness it may be required to fund care. 

Does it always fall to be treated as capital for the purpose of funding care home fees? Can it be retained within the family, and if so how? If a local authority arranges the care home or an individual seeks assistance from a local authority for the provision of accommodation which has ‘self-funded’ to date, a local authority will make an assessment of the individual’s ability to pay the ‘standard fee’ (a pre-determine fee set by the local authority for care homes in its area).  If the resident has capital over a prescribed threshold (currently a modest £23,250) they will be expected to pay the full charge, until such time as their capital falls below the capital limit.  A home owning resident home is likely to have capital over this threshold which will be used unless their home is disregarded in the assessment of their resources.

When is a home disregarded?

Where a stay in a care home is temporary, the ‘home’ will be disregarded for the purpose of capital (so long as the resident intends to return, it is still available, or the resident intends to sell it).  If the stay is to be permanent the value of a resident’s home will be taken into account, unless it is  can be disregarded.  Where the home is occupied by a partner or former partner, an estranged or divorced partner who is a lone parent with a dependent child, or a relative or relative of a member of the family who is either aged 60 or over, incapacitated or under 16 and a child for whom the individual is responsible, it will be disregarded. A local authority may also disregard a home in other circumstances, i.e. it is occupied by a carer who gave up their home to provide the resident’s care or an adult child who lived with the resident.

Homes are valued at their current market value, less any debts secured on it and 10% for sales costs.  The interest valued is the individual’s beneficial interest in the property.  The CRAG (“Charging for Residential Accommodation Guide”) states that the value of a beneficial interest is governed by the amount a willing buyer will pay for that interest.  Whilst at one time local authorities would automatically value a property held by joint beneficial owners as nil, this is no longer the trend.

The existence of a willing buyer for a partial interest may depend on the circumstances of the shared ownership.  Is the other beneficial owner(s) willing to buy the individual’s share?  Is there a market for the sale of a share of a property?  If the other beneficial owner is in occupation that will have an impact. Is there any market for a share in property occupied by another person with a defined share? A number of local authorities have argued that there is.  There is little case law on the subject at present although in the context of other benefits it is clear it is necessary there has to be realisable value so that someone can be said to actually have capital (Secretary of State v Hooligan [2002] EWCA Civ 1890).
This area is ripe for further development.

Deprivation of Capital

If a resident reduces the value of their home by gifts or arrangement that reduces their interest, a local authority may decide the resident has deprived him/herself of capital. If satisfied that action was for the purpose of avoiding or reducing the charge that would otherwise be made for care home fees the local authority can intervene. A key consideration in these circumstances will be the timing of the gift or disposal.  What is required is consideration of the individual’s intention at the date of disposal.  In R (on the application of the personal representative of Beeson) v Dorset County Council (2002) ACD 129; (2002) HRLR 15 the CoA stated that intention in this instance was to be assessed subjectively.  But how is this to be applied if the transaction in question was undertaken by a family member acting under a power of attorney? Another fertile area for dispute and litigation.

Recovery and Enforcement

The method and onus of recovery of care home fees will depend on the parties to the contract. 
If the local authority makes the arrangement, the contract for the provision of accommodation will be between the care provider and the local authority (under Part III of National Assistance Act 1948 (“NAA”)).  Since the local authority will therefore be liable for unpaid fees they will look to recovery by enforcement against the resident’s home.  A local authority can seek to secure unpaid fees by way of a charge over the resident’s share of the home once a proper assessment has been undertaken(s.22 HSSASSA), or to recover those fees by way of a civil debt even though there is no privacy of contract between the resident and the local authority (s.56 National Assistance Act 1948).  If the local authority intends to use the civil debt procedure it has 3 rather than the usual 6 years to do so.

Family members should also keep in mind that the local authority has the power to transfer the liability for the care home fees to any person or persons who received the capital asset if transferred within the six month period prior to entering into a care home (if the accommodation was arranged by a local authority – see s.21 Health and Social Services and Social Security Adjudications Act 1983 “HSSASSA”).  The local authority can take such a step even if the recipient was unaware that the gift or transfer had been entered into to avoid these fees.  A third parties liability will be limited to the value of the asset transferred.

Article by Alison Meacher

If you practice in this area or you are interested in learning more about it Alison Meacher and Kerry Bretherton are holding a Round Table to discuss these and other matters concerning care home fees on 26 July 2011.  For more information, please click here to view the seminar flyer.