Deferred payment agreement
What is a deferred payment agreement?
The benefits of a deferred payment agreement
Am I eligible for a deferred payment agreement?
What types of security are required to enable me to have deferred payment agreement?
What is the total amount I can defer?
How do I apply for deferred payment agreement?
Do charges and interest apply to deferred payment agreements?
Can I end the deferred payment agreement?
Alternatives to the deferred payment agreement?
Can a deferred payment agreement be refused?
What if I'm not happy with the decision?
A deferred payment agreement is an agreement with us which could help you to use the value of your home to fund residential care costs.
For the first 12 weeks of your permanent admission to a residential or nursing care home the value of your main property is not taken into account and you may be able to receive additional financial support from us. This is known as the 12 week property disregard period.
You will pay a weekly contribution towards your care from your income and other savings. This is worked out by an assessment of your ﬁnances and is called your assessed weekly charge. This will apply if you do not have other financial resources of more than £23,250, such as savings, shares or another property. At the end of the 12 week property disregard period, your main property will be included in your financial assessment and you will be assessed as having to pay the full cost of your residential or nursing care.
You may be eligible for a deferred payment agreement if you are assessed by us as having to pay the full cost of your residential or nursing care but you are unable to pay the full weekly charge because your capital is tied up in your property. We will then pay the difference between your assessed weekly contribution and the actual cost of your care in a residential or nursing care home. This amount paid us becomes the deferred payment.
The deferred payment amount you are assessed as having to pay for your care and support is delayed and not ‘written off’ and the costs of your care and support will still have to be repaid by you or someone on your behalf at a later date either when you choose to sell your house or 90 days after your death.
- You will not be forced to sell your home
- You could rent out your home and create some income for yourself which would reduce the amount you had to pay us back when the house was sold
- You might be entitled to claim some benefits which you could use towards your charges
- If there is an existing agreement for a third party 'top up', where a family member or other person puts additional money towards your placement, and you decide to take advantage of the deferred payments agreement. You can add the cost of the top up payments (after the 12 week property disregard period has ended) to your deferred payments agreement loan, if we agree there is enough equity in your home. The deferred payment is currently, according to government rules, the only way of paying any agreed top-up yourself without depending on a third party
Usually you will need to meet the following criteria to qualify:
- your needs are being met in a care home, or in some cases supported living accommodation, and you have been assessed as having eligible needs which that should be met through a care home placement
- you have no more than £23,250 in assets (i.e. in savings and other non-housing assets) excluding the value of your home
- you must own or have part legal ownership of the property, which is not benefitting from a property disregard. For example is not occupied by a spouse or dependent relative as defined in our charging policy. Your property must be insured (if it is not, you must arrange for it to be insured at your own expense)
- allow us to have the ﬁrst legal charge on your property. There can be no other beneficial interests on the property, for example outstanding mortgages or equity release schemes, unless this is approved by the local authority
- have mental capacity to consent to a deferred payment agreement or have a legally appointed representative willing to do this for you
- ensure the property is registered with the Land Registry. If it is not then you must arrange for this to be done at your own expense
If you do not entirely meet the above criteria you may still be able to access the deferred payment scheme. Eligibility will be decided on a case by case basis.
Whilst in the agreement you will also need to:
- have a responsible person willing and able to ensure that necessary maintenance is carried out on the property to retain its value; you are liable for any such expenses
- insure your property at your expense
- pay your contribution regularly and on time. If you do not we retain the right to add this debt to the loan amount
- ensure there are no other beneﬁcial interests on the property, for example outstanding mortgages or equity release schemes, unless this is approved by us
We must ensure adequate security is in place when deciding whether a person is entitled to a deferred payment. The onus is on the person (or their representative) to provide evidence of the security.
We offer two versions of deferred payment agreement:
- A full DPA where the debt has built up is secured against the person’s property. We will accept a first legal mortgage charge as adequate security if the person is eligible.
- A short-term DPA if the person’s property is for sale, we can provide a short-term arrangement for meeting care home fees based on an undertaking signed by a solicitor guaranteeing to pay the amount owed to the council when the sale is completed.
In addition to a first charge and the short-term DPA, we will consider alternative security for a DPA and associated interest. We have full discretion as to whether we will accept this.
This list below provides examples but is not exhaustive:
- Third party guarantor
- Second legal charge
- Life assurance policy
- Leasehold properties
Alternative security which will not be accepted by us for a DPA includes:
- Mobile home
- Equity release scheme or lifetime mortgages
- Property abroad
Where we agree that the person may rent out their property we will treat the net rental income, (i.e. allowing for management fees and estimates of income tax) as additional income in the person's financial assessment.
We will revalue or require a revaluation of any security we are holding every two years to ensure that the DPA may continue.
The total amount you can defer is subject to an equity limit.
We will need to consider whether the equity available in the person’s security (usually their property) is adequate security for the deferred payment agreement. We will apply an equity limit to ensure that some value remains in the property used as security, over and above the amount deferred in the DPA.
The equity limit is set as 90% of the market or surrender value of the property minus:
- the total amount of any debts secured on the asset(s), by a separate agreement with someone else, which has priority over our security (not normally allowed by us)
This means, for example, that if the property is worth £100,000, then the equity limit is 90% of this value ie £90,000, less the current capital limit (currently, £14,250) - so the maximum lending is £65,750.
If the person has already been lent a total amount that matches the equity limit (in the example above this would £65,750) we will not lend any more towards the care charges, unless the value of the property increases and so releases more equity. However, interest and DPA fees can still be added to the total deferred payment by us.
Where a fall in the value of the property means that the total amount lent now exceeds the equity limit, we will again not lend the person any more towards their care charges, unless the value of the property increases and so releases more equity. Again, additional interest and DPA fees can still be added to the deferred payment by us.
We are required by law to refuse to allow additional amounts of care costs to be deferred beyond the equity limit. However, interest can still build up beyond this point, and DPA fees can still be added to the deferred payment.
As part of your financial assessment you will be advised if you qualify for a deferred payments agreement and what you need to do to apply. You may also be advised that there are alternative options you can consider.
This can be a difficult and confusing time and we strongly recommend that you get independent financial advice before you enter into any agreement.
Under the Care Act, local authorities are able to charge an administration fee for arranging and running the deferred payment agreement and interest on any accrued debt. By law the administration charge should not exceed the costs of providing a deferred payment arrangement and interest will be in line with a national standard set by the government.
The current charges for DPA fees are shown on the adult social care fees and charges page.
We will inform you before you enter into a deferred payment agreement what the interest rates are currently set at and when interest rates are likely to change.
We will also inform you of the rate of interest which can be no more than:
- the actual cost of funding the loan
- the maximum rate which we are permitted to charge under Care Act regulations. This cannot be more than a government-approved standard rate, linked to the market gilt rate which is published every six months, plus 0.15%.
We may vary the rate of interest to reflect any change in the cost of funding the loan subject to the maximum rate.
Interest will be charged daily at the equivalent of the current rate of interest and added to the total deferred payment on a fortnightly basis.
People who have a DPA will be notified of any changes to charges on an annual basis. The DPA fees and interest are added to the amount deferred unless it is specifically requested when applying for the DPA that these be invoiced separately, and they are paid immediately by the person.
You will be advised to seek independent legal and financial advice before you enter into an agreement.
You can end the deferred payment agreement in a number of ways:
- voluntarily by you, or someone acting on your behalf, paying the full amount that is due
- when the property or other form of security is sold and we are repaid
- upon death of the person receiving care and the amount is repaid to us from their estate
On ending the agreement, the full amount due must be paid to us.
If you don’t want to have a deferred payment agreement, there are other ways to pay for your care costs. Some examples are as follows:
- you may choose to rent out your property and use the income from this
- you may also choose to pay the full cost of your care from your available income and savings or assets, or a family member may choose to pay some or all of this for you
- if your property is up for sale and on the market, you may wish to consider obtaining a solicitor’s undertaking
We can refuse a request for a deferred payment. In such circumstances the decision will be notified in writing to the applicant and/or their personal representative. The decision will set out the grounds for refusal and provide for appeal rights. For information on circumstances which may potentially lead to such a refusal, see the eligibility section.
There may be circumstances where it is not possible to put a deferred payment agreement in place even if you qualify under the eligibility criteria, for example:
- where we are unable to secure future payment of the costs against the property or asset which is the proposed security
- the property or asset being used as the proposed security is uninsurable
- where you want to defer costs which are more than the property or asset is worth
- where you do not agree to the terms and conditions of the agreement
- if you are unable to make your own decisions and do not have a power of attorney in place for someone to act on your behalf
There may also be circumstances when we may decide not to defer further charges for you under the deferred payment agreement, although this does not allow us to demand repayment in such circumstances.
The decision can be reviewed in the following circumstances:
- the decisions to refuse the application did not take into account any new information which would have changed the decision
- there are eligible care costs we have to take into account
If you are dissatisfied with the outcome of the review, you can appeal within 20 working days of being notified of the outcome. This period can be extended for exceptional reasons.
If you or your representative remain dissatisfied with any aspect of the deferred payment agreement scheme, you should follow the customer feedback and complaints procedure.
For more information on our deferred payment policy and the Care Act: