Decision Date: 15th December 2020
What Happened
Mr X complained on behalf of his mother, Mrs Y.
Mrs Y had lived in the same residential care home since 2017.
Mrs Y’s contract stated that fees were reviewed annually and that the Care Provider would give four weeks’ notice of any fee increase.
The Care Provider wrote to Mr X in December 2019, explaining it would increase Mrs Y’s care fees from late January 2020 ‘in line with substantial increased staffing costs’, and the increase would be capped at 5%.
The letter stated that the new charge would be £4,723 monthly.
Mr X sent a formal complaint to the Care Provider. He stated that the new monthly rate had been increased by more than 5% and provided evidence of the maths behind that concern.
The Care Provider wrote back acknowledging that there had been misunderstandings from both ends, but that it would indeed be charging the new sum of £4,723 monthly.
Mr X complained to the LGSCO.
The Care Provider told the LGSCO that there had been a mistake in the letter sent out by the Care Provider; it should not have included the detail that charges would be capped at a 5% increase. It explained that the mistake came from a template document and steps had been taken to ensure more thorough checking.
What was found
The LGSCO highlighted that fee increases are allowed but asserted that the provider must explain why they are necessary and provide sufficient notice. The care provider in this matter failed to set out the reasons for the increased fee, which was fault.
The LGSCO elaborated by stating that Mrs Y’s contract with the care provider did not meet the standards required by the Competition and Markets Authority (CMA). It did not clearly state the circumstances under which fees may increase, or how they were calculated. This was also fault.
The LGO recommended that the care provider apologise and review its contracts.
Points to note for councils, professionals, people who use services and their carers, advocacy providers, members of the public
It is not widely known amongst the general public that the LGO can investigate private non-council related complaints about adult social care providers.
When a person moves into a care home and is funding their own care, a contractual arrangement is then made between the person and the care home. As with all contracts, the terms should be clear, accurate and unambiguous.
Regulation 19 of the Care Quality Commission (Registration) Regulations 2009 states providers must give the service user, or person representing them, a written statement setting out the amount of fees to be paid. The CQC does not dictate limits on how much care providers can increase fees by. However, providers must only increase fees according to a service user’s contract and should explain what the increases are needed for.
Increases
In the first instance, the provider needs a contract that deals with increases. The CMA guidance takes the position that providers need to provide an explanation and rationale for any fee increase.
The CMA guidance usefully sets out methods that the provider can use to demonstrate that a fee increase is justifiable and can be accessed here:
The care home in this case acted in accordance with the contract when wanting to increase its fees and gave the required notice to do so.
Where it erred, in the view of the LGSCO, was in giving notice of a capped increase but then not sticking to that, and in its failure to act in accordance with the guidance issued by the CMA in 2018 – see para 4.42:
‘Simply stating that your fees may go up as a result of ‘increased costs’, ‘local market conditions’ or ‘the wider national economic picture’, will not make your terms fair. This type of general wording is both unclear as to what residents can expect and open to misuse, since residents can have no reasonable certainty over what the increases will be. Such terms also fail to recognise that, generally speaking, you are likely to be much better able to anticipate changes in your costs than residents are’.
The CMA guidance that was in force in 2020 has now been updated for un-related reasons and can be found here: https://assets.publishing.service.gov.uk/media/61b09fbde90e070448c520f0/CMA_care_homes_consumer_law_advice_—-.pdf
1.28 In particular, your terms must set out clearly the circumstances in which a self-funded resident’s fees may change during their stay and the method of calculating the change. If your contract simply says that any increase will be ‘cost reflective’, or ‘reasonable’ or limited to ‘unexpected changes’, this is unlikely to be fair, since residents will be unable to foresee the changes.
The CMA guidance now says this, at para 4.40 and the same as before at para 4.42, but without any reference to parties’ freedom to contract and the case law:
Terms which give you, in effect, an unlimited right to increase the price of your service after it has been agreed are likely to be unfair under consumer law, especially where the resident has no choice but to pay the higher price or leave.
The point driving this CMA view is that many will not be in a position to leave without untold harm to their wellbeing attachments and familiarity with their surroundings – all human rights issues which could be contended to compel the council to keep the person in that setting, if the council is now liable.
So, as social services legal framework experts, we need to disagree with even the CMA as to that blanket statement, because a person will often be able to rely on the local authority to meet the needs – including, sometimes, the need to stay, and pay the full price being asked as at that point. The current law is that that can be the case if they have assets lower than £23250 but in the future, it will apply even if they have assets up to £100K.
A person who is not yet eligible for council support and placement arrangements will NOT be able to assert human rights, however, or fall back on the State.
If a care home can increase its fees unilaterally or (which is the same in terms of effect) deem the person to accept if they do not leave, then that needs to be made clear but if it is, we do not think it would automatically be found to be unfair or unenforceable.
If one thinks of a school contract for private school fees, it seems to be accepted that the sanctity of contract is such that if one doesn’t like the increased fee, one needs to vote with one’s feet and remove one’s child. That amounts to an enforceable and unilateral variation of the fees, and it is not regarded as unfair.
We can see that in the context of care home contracts the person doing the paying is the very person who may well be vulnerable and deteriorating cognitively, as well as in financial terms. We think that the CMA guidance does not itself adequately consider the position of a person with incapacity issues at the point of the home’s asserted right to vary the price upwards: such a person may not have any relatives or anyone to alert the council to their plight. It is for that sort of a person particularly difficult to obtain help to bottom out the security of one’s position, under an existing contract.
The CMA guidance does say this, with which we agree:
The vulnerable circumstances of the resident, at the time the contract is agreed, and when any term is being enforced subsequently, are likely to be important considerations for a court when assessing the fairness of your terms.
But for that reason we think that the CMA guidance should explain that people lacking in capacity are automatically entitled to have a council meet their needs (if eligible in terms of severity) by contracting for them, however rich they are.
What is noteworthy is the way in which the LGSCO treated the CMA guidance as if the CMA’s role was enough from which to find that the contract would have been found to be unenforceable. The CMA was not involved and did not consider whether to use its powers to render the contract unenforceable; and yet the LGSCO applied this guidance as if it was law.
It should be noted that no authority is given by the CMA for its position that reasons for increases have to be ‘valid’ ones in order that that organisation would regard them as ‘fair’.
Under the law of contract, people with capacity can set whatever terms they like, and a variation of any amount IS a variation, after all, and there may be a clause permitting the variation and it may be a unilateral right that has been provided for. It’s against that background that the Unfair Contract Terms Act applies to contracts between homes and consumers, and the CMA does have authority over the fairness of terms.
The perception in the sector is that the law is that an individual not accepting a fee increase will have to leave, (or be turned out with all due process after not accepting the increase, given that care homes believe that all such contracts can be terminated on notice without there needing to be a reason), but then simply referred to the local authority for safeguarding, if lacking in capacity, by that time.
There has been case law (Amberley) which touches on this perception, in the Court of Appeal, in which the judgment casts some doubt on this common view. The residents’ contracts included a term stating that the level of fees payable to A was subject to review as costs increased. The local authority became responsible for paying the fees for certain residents whose obligations to pay fees constituted “existing arrangements” within s.50(6) of the Health and Social Care Act 2001, and their liability had thus become the liability of the local authority. A demanded increased fees from the local authority to cover higher costs.
The court held, dismissing A’s appeal, that although parties to a contract could agree that one party could unilaterally vary the terms to the detriment of the other, that was an unusual provision and clear words would be required to achieve that result. There was nothing in the contract terms giving A an express right to increase the fee unilaterally and then enforce the increase. In context, the fee review clause meant that the fees were subject to review, and the parties must have intended that A would carry out the review; however, if A wished to increase the fees, it had to obtain the resident’s agreement so as to vary the contract.
In the end that finding in that case that the increase was not enforceable without agreement of the service users, turned on the specific contract in use by that care home. The contract that was in place between the residents and Amberley stated in relation to fees that: “The level of fees is subject to review as costs increase. No fee is stated here as a standard, due to the reviews”.
If a party wishes to be able to change a fee unilaterally then it must be made clear in the contract itself. See here, if you are interested in this aspect of contract law – https://www.casemine.com/judgement/uk/5a8ff6fd60d03e7f57ea553f
The LGSCO did not and could not change this fee increase as a matter of contract law; but the report recognised that Mr Y had been put to the trouble of making a complaint and had been given unclear information regarding the fees – a clear requirement of the CMA.
This complaint highlights the way in which the LGO can be a valuable resource to those funding their own care and having difficulty with providers changing fees. It resulted in an apology and better and clearer contracting arrangements for all those funding their own care.
The full Local Government Ombudsman report of Goring Care Homes’ actions can be found herehttps://www.lgo.org.uk/decisions/adult-care-services/charging/19-020-835