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What is a deferred payment agreement?

A deferred payment agreement is a loan from Dorset Council. It’s there to help you if you have been assessed as having to pay the full cost of your care home but can’t afford to cover the fees in full because most of your capital is tied up in your home.

It’s not the same as a conventional loan as we use your home as security. We don’t give you a fixed sum of money when you join the scheme, we pay an agreed part of your care home bill for as long as necessary.

You would enter into a legal agreement with Dorset Council by signing a legal document. If your home is jointly owned by other people, they will also have to sign the agreement. The agreement will explain the responsibilities of the council and your responsibilities. We then place a legal charge on your property, which is like a mortgage, to safeguard the loan. You will be asked to pay the costs incurred by us in setting up the agreement.

You will pay a weekly contribution towards your care from your income and other savings. The amount is worked out by an assessment of your finances. This is explained in our factsheet paying for care and support services. We pay the part of your weekly bill that you can’t afford until the value of your home is reached. The part we pay is your deferred payment.

Before entering into a deferred payment agreement (DPA) you may want to consider taking independent legal and financial advice. A DPA is one option to meet the cost of your care, but there may be other options available to you.

It’s your responsibility to ensure and maintain your property to habitable standards to protect the value of your property. To help with the cost of this, you can keep up to £144 per week from your income.

You can end the agreement at any time. For example, you may sell your home. The loan then becomes repayable immediately. Otherwise, the agreement ends on your death. The loan is repayable 90 days after death. We can’t cancel the agreement without your consent.

We will send you a written statement of the outstanding loan for six-month periods ending every June and December. We will also confirm the amount you owe within 28 days of you making a request.

As part of the application process to join the deferred payment scheme, we are required to do specific checks on applicants, which includes confirming the identity of the person making the application.

If any of the following circumstances apply it will not be possible for us to secure a legal charge on your property. Therefore, we would be unable to enter into a DPA in the following cases until you have taken the necessary action:

  • the property is unregistered – you will need to contact a solicitor to assist with the registration of the property with the Land Registry, which will incur a cost
  • the property is owned by more than one person – all joint owners will need to agree to a legal charge being placed on the property
  • the property is jointly owned with a deceased spouse – the ownership will need to be changed with the Land Registry. You will need to provide a copy of the relevant death certificate and ensure that the ownership is changed. A solicitor will need to do this.
  • if there is already a charge on the property – the owner of ALL charges would need to agree to a further charge being placed on the property
  • if the person doesn’t have mental capacity regarding their finances, and there is no appointed Deputy or Power of Attorney – someone will need to arrange to be legally appointed to act for the person to enter into the DPA
  • if there is insufficient equity in the asset to ensure that the cost of the care, plus interest for a two year period from the date the agreement commences, will be recoverable

If any of these circumstances apply and you wish to be considered for a DPA, it’s extremely important that you start dealing with the issue as soon as possible.

What are the advantages of deferred payment?

Agreeing to a DPA allows you to claim Attendance Allowance or, if you are under 65 years old, the care component of Disability Living Allowance (DLA) or Personal Independence Payment (PIP) whilst you are in residential care.

You don’t have to sell your house whilst you are alive. If you choose a DPA we will discuss the outcome of the financial assessment, the cost of your care, the equity in the property (we will do an evaluation) and the costs to you in setting up and running the agreement.

You may rent out your home and use part of the rental income to pay your care home fee. The advantages of renting out your property are:

  • the DPA debt will be lower
  • your property will be occupied
  • your tenant will pay utilities and Council Tax
  • the council will only take account of 80% of your gross rental income in the financial assessment – this leaves you with 20% to do as you wish with

If you choose to rent out your property or allow your property to be occupied by any person, you must first obtain written consent from us. You must also ensure that you have adequate landlord’s insurance which we agree is satisfactory or the relevant empty property insurance.

If you choose a more expensive residential care home than we can purchase the care for, you can choose to add the amount to the deferred loan (if there is sufficient equity in the property). Alternatively, a top-up for this extra amount would be required. The options are:

  • a first party top up – this is where you pay this extra amount in a separate agreement between the council and your care home out of your own savings or deferred against the property. We will assess if this is a suitable option
  • however, the extra cost placement could also come from a third party – often a close family member; again, we have a duty to assess whether this is sustainable by the person making the payment on your behalf
  • we will only allow a ‘top-up’ to be included in the deferred payment if there is enough equity in your home

What is the cost of a deferred payment agreement?

Our charge for setting up the DPA is currently £804, which reflects the actual costs that the council incurs. There is also an annual administration charge of £120 which is calculated on a monthly basis and added to the account. The set-up charge and the annual charge can be added to your DPA but will also incur interest. These charges cover legal costs, land searches, registry and valuation charges. If you wish to pay the charges separately (and not include them in the loan), you will need to give us 14 days' notice. Once this notice has taken effect, we will invoice you separately for the charges as they become due. If you do not pay the invoice within 28 days, the cost will automatically be added to the loan and interest will be charged on this from that date.

You can ask for a breakdown of the charges at any time, and we will give you notice of any changes. If you choose to add the set-up fee to the loan and then decide you do not want a DPA, you will still be invoiced for any setup fees incurred.

This valuation fee is based on a straightforward desktop valuation. If an internal inspection is required, this fee will increase. If you don’t agree with our valuation figure then you will be asked to arrange and pay for an independent valuation by a Royal Institute of Chartered Surveyors registered surveyor, which will be more expensive. This figure can’t be deferred against the agreement.

List of charges for deferred payment agreements

First-year set up fee

First-year set up fee  Cost
Legal costs – a straightforward case where an applicant is a sole owner, the property is registered with the Land Registry and where no other charges are present on the property £455
Adult Services costs – DPA and financial assessment process £142
Valuation fee £156
Land Registry charges £51
Total £804

Annual charges in subsequent years

  • adult services admin fee which includes the cost of preparing statements, informing you of changes in interest charges, obtaining copies of insurance documents and rental agreements - £120
  • revaluation fee, if required - £152

What interest will be charged?

The interest rate is the maximum set by the Department of Health and Social Care and reflects the cost of government borrowing. This rate may go up or down on 1 January and 1 July each year. The interest rate at 1 January 2021 was 0.45% per annum and from 1 July 2021, 0.75%. The interest will be compounded on a daily basis.

How do I apply for a DPA?

To apply for a DPA, you must;

  • have capital (excluding your house) of less than £23,250 (the upper capital limit)
  • be assessed by a care practitioner as requiring permanent residential/nursing care in a registered care home and be entering one
  • be the sole owner of the property or, if the property is held in joint or multiple names, the other owner(s) must agree to a legal charge on the property in favour of the council
  • ensure your property is registered with the Land Registry (if it isn’t, you must arrange for it to be registered at your own expense)
  • have a responsible person willing and able to ensure maintenance is carried out on the property to retain its value – you are liable for these expenses
  • insure your property at your expense – you may be asked to provide evidence that the property is adequately insured every year
  • have the mental capacity to agree to a DPA or have a legally appointed agent willing to agree to this

Also:

  • the property must have been your main residence before going into residential/nursing care
  • there can be no other beneficial interests on the property, for example, outstanding mortgages or equity release schemes, unless this is approved by us.

How much can I borrow?

To make sure that the money being lent to you can be repaid, we will calculate the lendable equity in your property. This calculation will be based on a desktop valuation. If you don’t agree with the valuation you can obtain your own ‘Red Book’ valuation by an RICS registered surveyor, but you will be asked to meet the cost of this yourself.

We will take 10% off the desktop valuation of the property, to reflect the costs incurred in selling the property. Then we take off £14,250 (as at 1 April 2015), which is the amount under which you will not be asked to contribute towards the cost of your care from your capital (you will still be asked to contribute from your weekly income). Finally, we take off any charges that are secured against the property, for example, mortgages, equity release schemes and secured loans, etc.

The maximum amount we can lend you under the DPA is the amount that is left after the deductions set out above. We will ask you not to increase any debts you have already secured against the property, for example, equity release agreements.

Once the amount of your loan reaches 70% of the lendable equity in your property we will undertake a review of your care to discuss how to fund your care in the future. This review will take account of both your care needs and costs.

Should the equity in the property deplete and you become entitled to assistance with funding from the council, there is no guarantee that we will meet the full cost of the care in the future.

How can I apply for a Deferred Payment?

After considering all of the information, and if you still wish to apply, please contact the Deferred Payments team for an application form:

01305 228813

deferredpayments@dorsetcouncil.gov.uk

What else do I need to know?

If you decide at any time to repay the loan, either in full or in part, then you must give us at least 14 days advance written notice of;

  • the amount you are going to pay
  • the number of times you will be making the payment (for example, a one-off payment, a set number of payments, or to make the payments until further notice).

We may decide not to defer further sums if we believe that the lendable equity limit has been reached. If this happens we will try to give you 30 days written notice of the reason not to defer any further payments, but this may not always be possible, for example, if the equity limit is reached because of a fall in the property value.

You must inform us of any other change of circumstance that may affect the agreement. If you are in doubt, please contact us.

Where do I get help and advice?

Before agreeing to a DPA you may want to consider taking independent financial and legal advice, as a DPA is one option to meet the cost of the care, but there may be other options available to you.

The council does not recommend individual financial advisors, but we can help you find an accredited advisor. We will only signpost you to independent financial advisors who are regulated by the Financial Conduct Authority (FCA) and who specialise in funding long-term care. For example, accredited members of the Society of Later Life Advisors (SOLLA). Some members of SOLLA are also with firms that are members of the Buy with Confidence scheme, which means they are Trading Standards approved. You may find a very good advisor who is not a member of SOLLA. If the advisor is regulated by the FCA, they will adhere to a code of conduct and take responsibility for the suitability of any product they recommend.

Further information about obtaining financial advice is also available from the Money Advice Service website

0800 138 7777

If you feel there is a mistake in the assessment you can ask to have it reviewed. This must be in the form of a written appeal to the Financial Assessment Team or the Deferred Payment Team within 28 days of the written confirmation of the outcome of the assessment.

How do I make comments or complain about Dorset Council?

Dorset Council is committed to providing quality services to you, your carers and family. We welcome any comments as this helps us understand what parts of our service people like.

If you are unhappy about the service you have received and want to make a complaint, please speak to a social care worker or contact Dorset Council and ask for a copy of our complaints leaflet.

You can write to us at:

Complaints Team,

FREEPOST,

Business Reply Licence number

RRYH-AGJZ-TRGG,

Dorset Council, Colliton Park,

Dorchester, Dorset, DT1 1XJ.

 

Or by telephone on 01305 221061

 

If you don’t want to talk directly to us, you can contact Healthwatch Dorset, an independent organisation that represents the views and wishes of people who use adult social care services in Dorset.

healthwatchdorset.co.uk

0300 111 0102

Accessibility statement

Dorset Council is committed to making its information and services accessible to all. If you would like any information in an alternative format please contact us:

01305 221000

customerservices@dorsetcouncil.gov.uk

Contact us

You can find further information about adult social care and support services provided by Dorset Council at:

adultsocialcare.dorsetcouncil.gov.uk

adultaccess@dorsetcouncil.gov.uk

01305 221016