IN THE MATTER OF THE CARE AND CHARGING POLICIES OF EAST SUSSEX COUNTY COUNCIL AND THE TREATMENT OF BENEFICIAL INTERESTS IN PROPERTY

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ADVICE

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  1. I am asked to advise by the National Association of Finance Officers (NAFO) in respect of the policies of the East Sussex County Council (“ESCC”) on charging for care services and the treatment of beneficial interests in jointly owned property. ESCC has been challenged in four cases in which it has determined that the value of the share of the property held by the person receiving care services is above the upper capital threshold. In three of the cases, the Local Government Ombudsman (“LGO”) has found no maladministration in relation to the valuation itself (although she did find fault in other aspects, primarily delay). The LGO has recommended that ESCC reviews its procedure and the way in which it deals with financial assessments that involve a share in a jointly owned property to ensure learning from the complaints and to take into account the requirements of the Care Act 2014 (“the 2104 Act”).
  2. The LGO cannot consider the merits of ESCC’s decision and Martin Serle Solicitors, who appear to act for all of the complainants, are threatening to bring judicial review proceedings on the grounds that they consider the valuations to be wrong, arguing that there can only be a value to the beneficial interest where it is likely that a court would make an order for the sale of the property upon an application.
  3. I am asked in my instructions to consider (i) with regard to the treatment of beneficial interests the lawfulness of ESCC’s current policy “Charging for Care and Support” (“the Current Policy”) and its former policy “Fairer Charging” (“the Former Policy”); and (ii) any amendments required to make the said policies lawful.

The Policies

  1. There is nothing in either the Current Policy or the Former Policy that I consider to be unlawful. However, there is no real detail in either of those documents. The Current Policy is a short 5 page document that for the most part deals with the issues of the principles that will be applied and the scope of services for which charges will be made. I do not consider there to be anything wrong with this approach. The 2014 Act is now supplemented by the comprehensive guidance in the Care and Support Statutory Guidance (“CSSG”) as to how the financial assessment should be conducted and this applies to both residential and non-residential services. The Former Policy covers only charges for non-residential services and was only necessary because the statutory guidance in the Charging for Residential Accommodation Guide (“CRAG”) applied only to residential services. The Former Policy contains the following statements:

The value of a property occupied by a client as their sole or main residence will be disregarded. The value of any other property owned or part-owned by the client will be regarded as capital.

There is nothing objectionable in either statement but they do not deal with the heart of the issue that the LGO is concerned about, which is how ESCC determines what the value of the part-owned property is.

  1. My reading of the LGO decisions is that it was the procedure that needs to be reviewed so that the faults found were not repeated. In particular:
  2. There was a need to ensure that when ESCC made its initial decision that the value of the jointly owned interest was more than the relevant threshold, that decision was explained in sufficient detail for the person to understand that (i) paragraph 6.016 of CRAG was being applied; and (ii) ESCC did not consider this was a case in which the nil value referred to in paragraph 7.011 of CRAG was applicable. Without that information, a person would not be able to make fully informed decision to request that an independent valuation be obtained. The position is similar under paragraphs 16 to 18 of Annex B of the CSSG (even though the very unhelpful and rather misleading paragraph about the interest having a nil value has gone). In both cases, it is necessary to inform the person that the local authority is asking them to agree that the value of the beneficial interest held is more than the threshold.
  3. There was a failure to make enquiries as to whether the co-owner or anyone in the family wished to purchase the client’s beneficial interest. Although it can be inferred from the dispute about the valuation that there is no such person willing to buy, the question ought to be asked at the outset.
  4. ESCC was criticised for the time taken to obtain the valuation from the Valuation Office Agency (“VOA”). I do not agree that it is unnecessary for the valuer to know the exact shares in which the beneficial interests in the property are held at the time of his or her instructions because this is relevant to the attractiveness of the interest to an investor and will therefore affect the price. However, the extent of the dispute is usually known at an early stage (eg in Mr D’s case he had set out the claimed value of the work done said to give rise to his additional shareat an early stage). The valuer could be instructed to value the interest on the basis of each party’s position as to the relative shares.
  5. The appeal process took much longer than the 20 working days promised by ESCC. In my view, the timescale given for the appeal is unrealistic in a complex case such as that of the Mr C concerning the farm. I recommend that the appeal process is amended to permit ESCC to set a longer timescale for determining the appeal where it considers that to be appropriate in all the circumstances. That will not prevent findings of fault where it does not progress the appeal diligently but it will set a realistic expectation in these difficult cases.
  6. The position with the Mrs D complaint is somewhat different. Although I agree with the LGO that the former home ought to have been disregarded whilst it was still occupied by Mrs D, I do not agree that the non-residential policy applied at all. In my opinion, Mr D did not move the extra-care housing scheme as a matter of his choice of living accommodation, he moved there to receive the care and attention that he needed. I consider this to have been a residential placement. That does not necessarily mean that everyone living in extra-care housing has been provided with a residential placement, just that each case must be considered on it facts to decide whether the person has chosen this as their accommodation and is then being provided with services in their own home or whether they have been placed in order to receive the care and attention that they need. That assessment was carried out under the legislation in force at the time, under the 2014 Act, paragraph 34 of the CSSG requires the main or only home to be disregarded in all cases where the care is provided other than in a care home and so ESCC is required to compare the nature of the occupation of the former home with the nature of the occupation of the extra-care housing to determine which can properly be called the main home.

The Valuations

  1. The LGO has found no fault in ESCC’s use of the VOA to obtain professional valuations and has found that it was independent of the local authority. However, the LGO cannot decide whether ESCC’s interpretation of the law is correct or if the valuation is correct; these are matters for a court. On 16th October 2015, Martin Searle Solicitors sent a pre-action protocol letter threatening to bring a claim for judicial review. The letter is redacted so I do not know which of the cases it concerns but I do not think that matters for the purpose of this advice because that it is clear that they seek to challenge the broad principle that a beneficial interest in a property can have any value at all where there is no real prospect of a successful application to court for an immediate order for sale.
  2. This is not a point that has previously been tested in the courts so there would be an element of risk as is inherent in any new point. Although I cannot be certain that a judge will agree, my view is that Martin Serle Solicitors are wrong. The valuations being conducted by the VOA should be on the basis of what they consider an investor would be willing to pay if the beneficial interest were to be offered for sale separately from the rest of the property. Where the purchaser is likely to be able to obtain an order for sale, that will obviously lead to a higher valuation because the investor will be able to realise their investment (and take their profit) in a much shorter timescale. Where an order for sale is likely to be deferred that will lead to a lower valuation because the investor will have to wait longer for their profit.
  3. When it is said that an order for the sale of property is not likely, that does not mean the property can never be sold; it simply recognises that the court would not force a sale under the current circumstances. This means the investor would have to wait until a co-owner dies or vacates the property voluntarily and cannot know how long it will be before they are able to take their profit. That is the principle that underlies the whole equity-release market and the companies offering such loans are happy to invest and wait an indeterminate period for their return. The likely wait for a return will affect the valuation, so that a share in a property occupied by a young family where there could be no sale until they had all voluntarily moved on will be worth less than a share in one occupied by an elderly person.
  4. These are all matters for the expert valuer and, provided that the valuation report demonstrates that they have been properly considered, the Administrative Court should not be able to go behind the valuation on any of the traditional public law grounds.
  5. I have not seen the VOA valuations in these cases (but have seen them in others). They can be of variable quality and do not always contain sufficient analysis to demonstrate that the above issues have been taken into account. If that is an issue, I recommend that ESCC requests clarification from the VOA. I have seen other valuations of jointly owned interests in property from Foster and Cranfield of 25 Britton St, London EC1M 5TY and their reports usually set out their experience of the market for unusual interests in property. ESCC may wish to consider getting a second opinion in respect of the property that is likely to be the subject of the judicial review application.

Other Issues

  1. Although my advice in concerned with the treatment of jointly owned property, I should draw the attention of ESCC to a concern that I have in the Current Policy regarding the deprivation of assets where is states where a person transfers capital to a third party, or otherwise disposes of a capital asset in order to avoid or reduce paying charges, they will be assessed as if they still had that capital. In putting its policy in these terms, ESCC is precluding itself from transferring liability for any unpaid charges to the recipient of the assets because s. 70 of the 2014 Act now requires the local authority to make an election as to who to pursue for the charges. If the resident is assessed as having notional capital then there is no difference between the amount that they have been assessed as liable to pay and the amount that they would have paid had the deprivation not occurred. Hence no liability falls upon the recipient.
  2. The reality in most cases is that the person has given away their only valuable asset and has no means to pay themselves. Although the CSSG at paragraph 19 of Annex E says that the person should be assessed as having notional capital as the first step, in my view the fact that this is highly unlikely to result in any payment being made is a good reason to depart from that and to assess the person as no longer possessing the assets transferred. That would then mean the local authority could pursue the recipient of the assets for the difference. In my opinion, that is what the drafters of s. 70 intended to happen.

Christine Cooper
9th November 2015

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IN THE MATTER OF THE CARE CHARGING POLICIES OF THE EAST SUSSEX COUNTY COUNCIL AND THE TREATMENT OF BENEFICIAL INTERESTS IN PROPERTY

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ADVICE

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Christine Cooper

Field Court Chambers

DX 457 Chancery Lane

Beverley Lambert,

Head of Income & Payment Team

Hertfordshire County Council

On Behalf of National Association of Finance Officers