Aspects of Charging for Residential and Nursing Care Accommodation
3rd Party Agreements, 12 Week Property Disregard and Deferred Payment Agreements
Policy Guidance Concerning:
The purpose of this document is to provide advice and practical guidance relating to the operation of the policy area’s listed above.
The Council can make provision for a person in need of residential care by virtue of Section 21 of the National Assistance Act 1948. The Council is required to charge an individual for residential or nursing care accommodation by virtue of Section 22 of the same Act. The principle for charging is that an individual should pay the full cost of the accommodation unless he can show the local authority that he cannot afford to do so. The rules governing the test of ability to pay are contained within the National Assistance (Assessment of Resources) Regulations 1992 and published as the Charging for Residential Accommodation Guide (CRAG).
The guide includes specific reference to the circumstances in which an individual or 3rd Party can make an additional payment toward the cost of accommodation, when a 12 week property disregard can apply and how and when a Deferred Payment Agreement should apply.
The following sections outline the policy and procedure to be adopted in the specific circumstances.
The guidance in this section relates to circumstances where a resident chooses to enter accommodation that is more expensive than the Council would normally pay to meet his assessed needs. It does not apply where the resident has not expressed a preference, but the Council is unable to secure a place for him at the rate it would normally pay to meet his assessed needs. In that instance a third party contribution should not be requested.
Current guidance concerning the application of The National Assistance Act 1948 (Choice of Accommodation) Directions 1992 is contained within LAC (2004) 20. It reaffirms that individuals can choose the home in which they wish to live. However, in order to receive funding from the local authority, the home must be capable of meeting the individual’s needs and must be prepared to provide a place at a price that the local authority would normally expect to pay for the assessed needs. If an individual chooses a more expensive home, then the placement can only proceed if there is a third party prepared to make up the difference between the fee that the local authority would normally pay and the actual fee requested. The local authority has to satisfy itself that the third party understands their obligation and that they will be able to sustain the payment. Individuals cannot normally use their resources to make a third party payment on their own behalf. There are however exceptions where a 12 week property disregard or Deferred Payment Agreement is in place.
In the process of identifying a third party payer, it is important to make the following points clear:
- The third party payment will be treated as income to the client and their contribution will be increased accordingly (CRAG section 8.018)
- If the third party payer is no longer able to sustain the payment, then it may be necessary for the client to either move rooms within the establishment, or indeed move to a home that will provide accommodation at the fee level that the local authority would normally pay.
Please see the standard letter to be sent to the person agreeing to make the third party contribution (Appendix A), the Example (Appendix A1) and the agreement that should be completed and returned (Appendix A2).
The terms of the Council’s contract with independent providers of residential care, require them to give notice of any fee increases that they are proposing to implement. Where a third party contribution is affected, it is important that:
- Contact is made with the person who is paying the third party contribution to ensure that they are willing and able to make the additional payment.
- If there is agreement, then a contract form SS619 (a) should be completed for the new inclusive fee.
- An email should be sent to the Client Finance Services Section (CFS) – email their mail box called “assessments” providing the following details – name of client, Carefirst number, name of home, new fee payable, revised third party contribution payable and effective date.
Although an individual cannot make an additional payment on his own behalf, except in the circumstances described above, in the case of R v East Sussex County Council,
Mr Justice Moses offered the view that it would be in order for a resident to transfer some or all of his capital (up to the maximum of £12,500 –amount at April 2005- disregarded in a financial assessment) to a third party to enable them to make a third party contribution on his behalf. The judge made it clear that this should be a voluntary agreement, but if entered into would result in the resident and the third party accepting the conditions and consequences as outlined above. The resident would also have to accept that if he had capital in excess of the disregarded level he would continue to be charged a weekly tariff income assuming that he still had his disregarded capital. Please note that any such arrangement would be voluntary and be between the client and the recipient of the capital sum. Although it is acceptable to make this information available, staff should not offer any advice as to the suitability of such an arrangement and clients should be encouraged to seek independent legal advice before proceeding with such an arrangement.
The following example may serve to illustrate the point:
A resident has capital resources worth £14,000, and income net of the personal expense allowance of £150. He chooses to enter a residential care home where the actual cost is £374 per week, while the council’s usual cost for someone with his assessed need is £354 per week. The council can only agree to the placement if a third party can be found to make up the difference of £20 per week. There is no one able to act in this capacity and so the resident arranges to give his grandson £5000 and he in turn agrees to make a third party contribution toward his grandfather’s fee. He is required to complete the third party agreement as in Appendix A1. This arrangement reduces the resident’s capital resources to £9,000. Despite the fact that the resident’s capital resources fall below the level that is normally disregarded, he is still presumed to have £14,000 and the tariff income remains at the level of £6 per week.
This option is clearly not open to everyone, but is a possible way forward where all parties are willing. However, staff should not comment on the suitability of such an approach for particular clients.
Clients entering permanent residential accommodation with capital assets, including the value of their former home, in excess of the upper limit of £20,500 (rate applicable at April 2005) are normally required to meet the full cost of their accommodation. However, in April 2001 by virtue of the Health and Social Care Act 2001, the 12 week property disregard was introduced. Guidance as to how these rules should be applied was given in section III of LAC (2001)10. In outline terms, this allows anyone entering permanent residential or nursing accommodation whether via the local authority care management arrangements or as a ‘private’ arrangement who has a house, to ask for assistance with the cost of their accommodation for a period of up to 12 weeks.
The main conditions are that:
- The disregard is for 12 weeks from the moment that permanent admission to residential care commences. This may follow a temporary stay.
- The individual meets the local authority criteria for residential or nursing care
- The property to be disregarded must have been their normal place of residence.
- That the total of other capital assets must be less than the upper limit of £20,500.
- It can be claimed from the Council up to 12 weeks following permanent admission to residential care. If the claim is successful, the 12 week disregard applies from the date of permanent admission and not the date of the claim. This is to allow for delays in local authority decision making processes.
- If the home is sold within the twelve week period, the disregard ceases to have effect from the date of the sale.
- If the person leaves residential care (where they have been living on a permanent basis), before the end of the 12 weeks and then re-enters on a permanent basis within 52 weeks they will be entitled to the remaining balance of the 12 week disregard. If a resident leaves permanent care and re-enters more than 52 weeks later, they will qualify for the disregard again.
The circumstances in which a 12 week property disregard may apply will normally fall into one of two categories:
- Where a client has already made arrangements to enter a residential home without any local authority involvement, but wishes to avail themselves of the limited state funding available through the 12 week property disregard arrangements.
- Where the local authority is involved prior to any decision being made about admission to a home and where it may have an on-going involvement.
The appropriate letters and agreements to be used in these circumstances are at Appendix B and Appendix B1.
In terms of the contractual arrangements that will be made between the homeowner and the Council, the following should apply:
In the circumstances described in ‘1’ above, assuming the request for a 12 week property disregard satisfies the requirements outlined earlier, a contract (form SS619) for a fixed period of 12 weeks should be used to ensure that the Council’s risk of overpaying the homeowner is minimised. Even with this approach there is a small level of risk if the client’s house were to be sold within the 12 week period. From the beginning of week 13, the client should have a contract with the homeowner direct.
In the circumstances described in ‘2’ above, there are two possible outcomes. Assuming that the conditions for a 12 week property disregard are met, the resident and or their representative will, in accordance with the Fair Access to Care Services policy, be asked to make a private arrangement direct with the homeowner from the beginning of week 13 as per the circumstances described in ‘1’ above. Further details of the FACS policy as it affects self-funded residential care is at
If however the resident is unable to take responsibility for their own arrangements and there is no one else able or willing to do so on their behalf, then the Council will have a continued contractual involvement.
In both these circumstances an ‘open’ contract i.e. no end date is shown on form SS619 is preferable. The final outcome is not necessarily so certain and problems over payment to the homeowner are avoided. The CFS staff will have informed the client or their representative of the required contribution for the first 12 weeks of accommodation and the full cost rate from the beginning of week 13. The client will also have been given information about the availability of a deferred payment agreement. As part of their standard procedure, credit control staff within CFS are responsible for monitoring payment of contributions as well as processing Deferred Payment Agreement applications to the County Solicitor. For more information and guidance on the use of a deferred Payment Agreement, please see section 3.
As referred to in the section on Third Party Contributions, there are exceptions to the normal rules that individuals cannot top-up their own contribution. (CRAG section 8.019B) These exceptions are described in the National Assistance (Residential Accommodation) (Additional Payments and Assessment of Resources) (Amendment) (England) Regulations 2001 and are where the client is availing themselves of a 12 week property disregard, or where a deferred payment agreement is in place.
Residents subject to the 12-weeks property disregard may make a top-up from:
- Earnings disregarded by CRAG. Income disregarded by CRAG.
- Capital disregarded by CRAG (with the exception of the value of the resident’s home
that is subject to the 12-weeks property disregard).
- Other capital resources, excluding their home, with the provisos that:
- people can only top-up to the value of the lower capital limit;
- where these resources are used to top-up by residents who have resources above the
- lower capital limit, the level of tariff income that applies during those 12 weeks of
- topping-up is the same as it would be if the person were not using capital to top-up
This is illustrated in the following example:
A resident who has accessed the 12-weeks property disregard has a house valued at £100,000, other capital resources worth £14,000, and income of £150. He chooses to enter a residential care home where the actual cost is £600, while the council’s usual cost for someone with his assessed need is £300. The council agrees to the placement, and the resident contributes income of £150 minus the personal expenses allowance, plus a tariff income of £6 per week to the costs of care. Tariff income is calculated at £1/wk for each £250 (or part) in excess of £12,500 (CRAG Section 6.006).The council makes up the difference between its usual cost and the income contributed by the resident. The resident agrees to make a top-up of £300 (the difference between the actual cost and the council’s usual cost). This reduces the resident’s capital resources (excluding the value of the home) by £3,600 over the 12 weeks. Despite the fact that the resident’s capital resources fall because of the topping-up, the tariff income remains at £6 per week. If at anytime in the future the value of the client’s capital dropped below £20,500, they would be eligible to be considered for financial support from the council.
Since October 2001, section 55 of the Health and Social Care Act 2001 has allowed a client, in permanent residential accommodation, who does not wish to sell his former home and who has other capital assets of less than £20,500,the rate applicable at April 2005, to apply to the local authority for a DPA to be established. The basis for such an agreement is that the Council has made arrangements under section 21 of the National Assistance Act 1948 for the provision of residential accommodation for the Resident. The Resident's liability to pay has been assessed in accordance with sections 22 of the 1948 Act. The Council considers that it is appropriate to enter into this agreement with the Resident. A DPA allows an agreed portion of the weekly accommodation charge to accrue against the value of the property. The outstanding amount becomes payable to the Council when either the client dies or the house is sold whichever is the sooner. The debt that accrues is interest free until 56 days after it becomes due. From day 57 interest is added at a variable rate notified by Government. Information about the DPA is contained in the leaflet Ref 10 ‘Moving into a Care Home in Devon’.
A more detailed information sheet and application form SS282 is at Appendix C. These documents are routinely sent to, clients entering permanent residential care who have an unsold house and appear eligible for a DPA, by the Client Finance Services team.
An example of how a DPA works is as follows:
A person who has entered permanent residential accommodation has a house valued at £100,000, other capital resources worth £14,000, and income, net of the personal expense allowance, of £150. He chooses to enter a residential care home where the actual cost is £354. In view of his capital assets, he would normally have to meet the full cost of accommodation. He does not wish to sell his former home and enters into a DPA with the Council. The unsold property is rented out and generates income (after expenses) of £100 per week. The resident contributes income of £150, a tariff income of £6 per week and £100 rental income to the costs of care. The council pays the difference between the cost (£354) and the income contributed by the resident (£256) of £98 and it is this sum that accrues against the DPA each week and becomes payable to the Council in the circumstances described above i.e. when the resident dies or when the house is sold.
If the resident, in the example above, had chosen a home where the fee was higher than the amount usually paid by the Council, the (National Assistance (Residential Accommodation) (Additional Payments and Assessment of Resources) (Amendment) (England) Regulations 2001, do allow for the resident to make his own top-up payment. The sources from which the payment can be made are the same as those described for people benefiting from the 12 week property disregard (see section 1 above). The top-up and deferred payment as in the example above can be included within the deferred payment agreement. It is therefore important that careful consideration is given to a self top-up, particularly for a younger resident, since he cannot be left with capital below the minimum threshold.
The following example should illustrate the point
A younger resident with a normal life expectancy has net income of £50 per week a property value £70,000 which he does not wish to sell. He is assessed as being able to pay the full cost for accommodation. He wants to enter a home costing £600 per week which is £150 per week above the rate that the Council would usually pay. He wants to enter in to a Deferred Payment Agreement. He can afford to pay £50 per week from his income leaving a sum of £550 to accrue against his property. At this rate the deferred payment would accrue at £28,600 per year and therefore his assessable capital of £57,500 (£70,000 less £12,500) would be exhausted in approximately 2 years. As the third party contribution cannot be sustained, he should be advised to consider less expensive accommodation.
- Appendix A - Standard Text for Covering Letter re Third Party Contributions
- Appendix A1 - Example of Third Party Payment Arrangement (13KB - pdf help)
- Appendix A2 - Standard text for Third Party Agreemen (14KB - pdf help)
- Appendix B - Standard letter text re 12 week Property Disregard (Client) (16KB - pdf help)
- Appendix B1 - Standard letter text re 12 week Property Disregard (Representative) (16KB - pdf help)
- Appendix B2 - 12 week Property Disregard Acknowledgement (17KB - pdf help)
- Appendix B2 - 12 Week Property Disregard Acknowledgement (Rep) (14KB - pdf help)
- Appendix C - Deferred Payment Agreement Information Sheet (17KB - pdf help)
- Appendix C2 - Deferred Payment Agreement Application Form SS282 (30KB - pdf help)
- Appendix D - Frequently Asked Questions (34KB - pdf help)
- Flowchart Third Party Contributions (37KB - pdf help)
- Flowchart - 12 week Property Disregard (61KB - pdf help)
- Flowchart Deferred Payment Agreement (DPA) (69KB - pdf help)