Going into residential or nursing care when you own a property

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This factsheet provides some options if you own property and the value of your share is included in your financial assessment.

April 2024 (FS30)

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Introduction

This leaflet provides some options if you own property and the value of your share is included in your financial assessment.

Ownership of a property is usually included as a capital asset unless a mandatory disregard applies. 

Deciding how to pay for your care costs using capital held in your property is a big decision. You may wish to discuss your options with a friend or relative and we recommend you get independent legal and financial advice. 

There are independent financial advisers who can support you to make the best decision for meeting care costs.

You can contact the Society of Later Life Advisers (SOLLA) which operates an accreditation scheme for financial advisers. 

SOLLA aims to ensure that people are better informed about the financial issues of later life, and can find you a fully accredited adviser quickly and easily. Find out more at SOLLA or call them on 0333 2020 454.

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The 12-week property disregard

The 12-week property disregard will apply if:

• you are in a care home on a permanent basis
• your non-housing assets are below the capital threshold of £23,250
• you have not been paying for care home fees on a private basis
• you were living in the property as your main home directly before you entered residential or nursing care

It would not apply if you were living in a relative’s house on a permanent basis before moving into residential or nursing care, but still owned a property. 

For this first 12 weeks, the value of the property is not taken into account in the financial assessment. This is to give you the opportunity to consider how to pay for your care from the equity held in the property. There are several options you may wish to consider.

They include:

• a deferred payment agreement, or another type of loan taking into account the equity held in the property
• selling the property
• renting out the property to help you meet your care costs

If you qualify for the 12-week property disregard period, we will complete a financial assessment to work out what your contribution towards your care costs will be. This will be based on your income and other non-housing capital assets. 

During the 12-week period we will make arrangements with a care provider to meet your care needs, this will usually be at our published rates. You will be asked to pay your contribution to the provider towards the cost of this care, and we will pay the difference. 

If the home of your choice does not accept our published rates, you or another person may need to pay a top-up towards the full cost of care. This would be the difference between the provider’s private rate and our published rate. 

After the 12-week period, we take the value of your property into account when we work out how much you should pay. 

The equity you hold in your property will usually be over £23,250. This means you will be assessed as self-funding and will need to pay the full cost of your care after the 12-week period. 

Our contractual arrangements with the care provider will be for the 12-week period only. You must discuss with the care provider how you plan to pay for your care once this period ends and make your own arrangements to pay them for your care.

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The deferred payment agreement (DPA) scheme

Under the Care Act 2014, all local authorities must operate a deferred payment agreement (DPA) scheme. It offers help to people going into a care home or supported living accommodation who own property included in their financial assessment.

It means people are not required to sell their property in their lifetime to pay for their care. Instead, they can enter into an agreement and can defer paying the full cost of their care and support until a later date. 

Under the Care Act a DPA must be offered if: 

• the person can provide adequate security for the debt, usually a legal charge on the property
• the person is ordinarily resident in the local authority area
• the person has needs which are to be met by the provision of care in a care home
• the person has £23,250 or below in capital assets excluding the value of their main or only home (for example, in savings, other non-housing assets and housing assets other than their main or only home)
• the person’s home is not disregarded

We offer the DPA to everyone who has a property that is being included in their financial assessment. In some circumstances we can apply our discretion to provide a DPA to a person who does not fit the above criteria. These requests are considered on a case-by-case basis. 

We can refuse a request for a DPA if: 

• we are unable to secure a first charge on the property
• where a top-up payment is required because the care provider will not accept our published rates
• where a person does not agree to the terms and conditions of the agreement

We also have the discretion to offer the DPA to those who have been assessed to require care in supported living accommodation and are intending to sell their property. The council is only required to enter into a DPA to cover the costs of care and support which it considers is necessary.

How it works

If you meet the above criteria, the DPA can be applied for if you are planning on selling, keeping or renting out the property.

How much can be deferred?

Usually, assistance under the DPA would be provided up to our published rates less your client contribution from income and other non-housing assets. This is called a ‘deferred contribution’. 

However, in exceptional circumstances, (for example, if someone has a life-limiting illness) we may be able to consider loaning an additional amount. If we are unable to do this, you will need to consider how you will pay for your care. You should consider getting advice from an independent financial adviser about other options as an alternative to a DPA. 

If you want to go into a care home that costs more than the amount we have agreed to pay, you can arrange for a member of your family to pay the ‘top-up’. 

When applying for the DPA you must discuss with your care provider whether they will accept our published rates and inform us of this on the application. This ensures there are no delays in completing the DPA process and we can provide the right information and advice to you. 

If they do not and the Council is unable to agree a top-up, you may wish to ask the care provider whether they will hold the whole debt as a private arrangement with no ongoing financial help from us.

The maximum amount we can lend you is equal to the value of your share of your property, minus 10% for selling costs, and the nationally set lower capital threshold of £14,250.

Repayment of the loan

The regulations for loans are set by government. The rules are clear that debts you incur as part of a DPA must be repaid and cannot be written off. 

If the loan ends due to the property being sold, the debt is due immediately. 

If the loan ends because you die, your estate will have 90 days to pay the deferred contribution. After 90 days, we begin our debt recovery process to recover the debt. If the debt is not paid in full within 90 days additional interest could be accrued.

Interest on the loan

Interest is applied from the outset of the loan and payable until the deferred amount is paid in full. It is reviewed on 1 January and 1 July each year. It is based on the market gilt rate + 0.15%. So if the gilt rate is 1%, the interest on the DPA is 1.15% (1+0.15).

Interest is compounded, meaning it’s added to the loan and interest is continuously charged on the increasing amount.

Additional costs associated with the loan

Because a DPA is a legal agreement, we apply a charge for the set-up costs to cover the work we do to put this in place. This includes the administration of managing the application process and the costs of our Legal Services team to set up the agreement and register the legal charge. All property valuations completed during the application process and duration loan are payable by the person. 

We also charge an annual administration fee which is invoiced or added to the loan every six months and a redemption fee at the end of the agreement. The scheme is cost neutral to us, we only charge the actual costs associated with setting it up and administering the loan. 

If you incur any costs outside our charges, such as solicitors' fees, you will need to pay these yourself. 

You will also be required to pay a contribution to the cost of your care throughout the period of your loan. This will be determined by completing an assessment of your remaining capital and income.

Solely owned property

For a solely-owned property, a market valuation provided by the applicant or an online valuation can be used. If both us and the client agree the valuation figure, a formal valuation is not required.

A formal valuation would usually be required at the application stage when at least one of the following applies:

• the property is of non-standard construction
• there is commercial or agricultural use of the property
• the property is in significant disrepair or suffering defects
• either the valuation provided by the applicant or an online valuation is not agreed by both us and the client

Applicants can request we obtain an independent valuation. However, the applicant will be invoiced for the associated costs.

Formal valuations are also required when the amount loaned reaches 50% and 70% of the equity in the property. The applicant will be invoiced for the associated costs.

Jointly owned property

We only include the value of the client’s share of the property.  The Council will instruct an independent professional valuation as part of the application process to determine the value. 

The cost of the valuation is payable by the applicant. We usually instruct the Valuation Office Agency (VOA) who will typically complete a desktop valuation. In cases where an inspection is needed to complete a valuation for non-standard properties or where the property is not being maintained, this will be charged on an hourly rate based on the length of time the work takes to complete. 

Should an inspection be required you will be informed and where possible an estimate of the cost will be provided before it takes place. 

If you jointly own a property with another person, the co-owner must also sign the deferred payments agreement and the legal charge. This allows the council to register a charge against the property as security for the loan funding. If a co-owner is not willing or able to sign the agreement, the DPA cannot go ahead. You will need to consider other options available to you. 

Although the charge will be against the whole property, we only loan up to the value of your share less the equity limit.

Before you apply for a DPA

Before applying to the scheme, you should carefully consider the following points.

We will place a legal charge on your property, which means we will have the right to claim back the amount loaned when the property is sold or transferred.

If we need to arrange a formal valuation of your property, you will need to pay for this on completion of the valuation, or choose to have the cost added to the loan. 

If you apply for a DPA and it does not go ahead, you or your estate will be invoiced in full for the cost of all work that has been completed. 

As part of the agreement, you will need to let us know who will deal with your estate in the event of your death. 

You also need to think about how your property will be looked after while you are not living in it. In particular, you need to consider: 

• how to maintain it
• how you’ll pay for building and contents insurance
• how you’ll pay for heating to prevent damage from damp and frost
• how to keep it secure

Applying for a DPA

You or the legal representative acting on your behalf can apply for a DPA. If we agree to your request for a deferred contribution, you should get independent financial advice before making the final arrangements. 

We will inform you of any additional benefit entitlement or changes that you must inform the Department for Work and Pensions (DWP) about. If you choose not to sell your property this may impact your financially means-tested benefit entitlement, such as Pension Credit or Employment and Support Allowance. You may still qualify for Attendance Allowance, or the daily living element of Personal Independence Payment.

Who can apply?

To set up and agree a DPA you will need to complete our application form and provide original or certified copies of the documents requested. 

If the person in receipt of care has capacity to manage their finances, they must sign the application and DPA agreement. 

If the person who is receiving care lacks the mental capacity to apply for a DPA, a deputy or attorney can apply on their behalf. If no such person exists and the person no longer has the capacity to manage their finances, you will need to apply for the appropriate legal authority to do this on their behalf. 

See Deputies: make decisions for someone who lacks capacity.

Please note:

The council is unable to release any financial assistance until the DPA and ID1 form that Legal Services will send to you have been fully completed and returned. A legal charge in favour of East Sussex County Council also must have been registered against the property. This is security for the care charges the council will loan for the benefit of the person receiving care.

The DPA and legal charge will need to be signed by the person receiving care, or by their representative in their capacity as Attorney or Deputy and by all co-owners of the property, if any.

All persons signing the legal charge will also need to return a completed ID1 form.

This is a requirement of HM Land Registry and calls for your identity to be verified by a conveyancer, a Chartered Legal Executive, or by personally attending one of the Land Registry’s customer information centres.

Details of what evidence is needed is shown in Appendix 1.

Allowances and maintenance of your property

The Care Act states that we should leave you with a weekly ‘disposable income allowance’ of £144. This amount also includes the standard weekly Personal Expenses Allowance of £30.15 to meet your personal needs while you are in long-term care. The remainder is to make sure you have enough money to maintain your property. 

You can choose to use some of your £144 per week to pay back some of the money you are being loaned by us. Doing this helps reduce the level of debt accruing. 

You will need to provide us with annual buildings insurance documents for your property and tell us how you will maintain your property. We will need to receive this information every year whilst the loan is outstanding.

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Renting out your property while you’re in long-term care

You may wish to rent out your property while you are in long-term care. If you do this, you will need to let us know and keep us updated of any changes. You must only rent the property on a six monthly tenancy and also have in place an agreement in place for what will happen if the property is occupied by tenants at the time the loan is due to be repaid. 

If you choose to rent out your property, we will include 90% of the rental income when we calculate the contribution you will make from your income. 

The decision to rent out your property needs careful consideration and you may want to get help and advice from family and friends, as well as independent financial advice. However, the additional income would reduce the level of the amount deferred.

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Your options if you go into an extra care housing scheme or supported accommodation

Under the Care Act we have the discretion to offer the DPA to people entering supported accommodation, extra care housing or a care suite. This is in recognition of the fact that when you give up your former property you may need short-term support to pay for your care fees while your property is sold. 

We will offer the scheme if the following criteria are met:

• the person is ordinarily resident in the local authority area
• the person has needs which are to be met by the provision of supported accommodation, extra care housing or a care suite
• the person has £23,250 or less in assets excluding the value of their property (for example in savings, other non-housing assets and housing assets other than their main or only home)
• the person’s property is not disregarded and the property is actively being marketed for sale
• under the same criteria as above, but you must be actively selling your former home 

We would not apply the 12-week disregard period if you are moving to extra care or supported accommodation. This means that the DPA would start from the first date you move into the care setting or the point when you reach the upper capital threshold, whichever comes first. 

When we carry out your financial assessment, we will make allowances for your living costs as part of the ‘minimum income guarantee’ which is set nationally. This amount varies depending on your circumstances. However, you will not receive an additional allowance whilst you are selling the property. Any contractual or upkeep costs such as service charges or a mortgage whilst you are selling the property will be taken into account in your financial assessment.

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Other options

If you decide a DPA is not for you, or if you want to know what else might be available, you can contact SOLLA. This not-for-profit organisation was set up to meet the needs of consumers, advisers and those who provide financial products and services to older people. 

You may also wish to check with your care provider whether they offer their own options where they can hold the care fees pending the sale of your property. 

We can give you a list of providers who could help you with property maintenance and rental opportunities for your property.

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How to get more information

Our Finance and Benefits Assessment team can answer questions you may have or provide application forms.

Phone them on 01323 464 699 or email: Finance and Benefits Assessment team.

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Appendix 1

You will need to take evidence of your identity with you so they can inspect either:

One of the following (List A):

• current valid full passport – state the country of issue and number of the passport
• current United Kingdom, EU, Isle of Man, Channel Islands photocard driving licence (not a provisional licence) – state the number of the licence
• current Biometric Residence Permit issued by the UK Home Office to a non-UK national resident in the UK – state the number of the permit

Or

Two of the following (List B) but no more than one of each type:

• credit card bearing the Mastercard or Visa logo, an American Express or Diners Club card. Or a debit or multi-function card bearing the Maestro or Visa logo which was issued in the United Kingdom and is supported by an original account statement less than three months old*
• utility bill less than three months old*
• council tax bill for the current year
• council rent book showing the rent paid for the last three months
• mortgage statement for the mortgage accounting year just ended*
• current firearm or shotgun certificate

* These must be postal statements. They must not be statements sent electronically.

You will also need to take two identical passport-size photographs which are less than 3 months old.

The conveyancer, Chartered Legal Executive, HM Land Registry officer or other approved verifier will complete section B of the form.

Conveyancers and Chartered Legal Executives may charge a fee to verify your identity.

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