Can a legal charge be put in place over a resident’s property to protect against non-payment of care home fees?

We are often asked whether a care home can put a legal charge in place over a resident’s property where the property is on the market and the resident is accruing unpaid fees at the home.

The simple answer is: Yes!

But… in order to put something in place which is legally binding, you need to be mindful of various bits of law including consumer credit legislation and consumer protection law.

Before you get started there are a few things to check:

• Does the resident own the property outright? We can carry out a title check at the Land Registry to find this out for you.
• Is there a mortgage over the property? Again this can be checked at the Land Registry. If there a prior mortgage, you would need the consent of the existing lender to put a second charge in place. Of course, this is only going to be useful if there is sufficient equity in the property to meet your fees once the first mortgage has been redeemed.
• Does the resident have capacity to enter into an agreement? If not, is there a lasting power of attorney in place or has a deputy been appointed? This is important to ensure that any agreement put in place is actually legally enforceable.

Assuming the above is in order, then a deferred payment agreement (essentially a loan agreement) and legal charge can be put in place. The deferred payment agreement captures the outstanding fees and extends credit to the resident for accruing fees for a fixed period of time, during which the property must be sold. This helps to incentivise sale of the property (and hopefully focus minds on accepting sensible offers). To ensure that the agreement is not caught under the Financial Services and Markets Act 2000 (requiring registration), it must meet one of the exemptions in the Act.

The costs of preparing the documentation and registering it at the Land Registry can be passed onto the resident, making this a cost neutral option for operators.