Decision Date: 05 Oct 2022
What happened
Mr and Mrs X lived in a privately rented property but owned eight properties which they rented out. They were also both directors of Company Z.
In 2020 Mrs X had a stroke and spent a period of time in hospital, a rehabilitation unit and then a care home, returning to her own home in February 2021 where an ‘extensive package of care’ was put in place.
In October 2020 (perhaps after savings having depleted but it’s not clear from the report) the Council discussed the cost of Mrs X’s care with Mr X asking him to complete a financial assessment form. As a result of this the Council decided Mrs X’s estimated capital was in excess of the upper threshold making her liable for the full cost of her care.
Mr X began to dispute the Council’s assessment of Mrs X’s capital. He claimed:
- There was little or no equity in the properties
- The properties were held in trust for his children
- Mr & Mrs X owned the properties as tenants in common meaning a court order was needed to sell them
However, the council estimated the equity across the portfolio to be £209,567. They also identified that no formal trust existed and therefore Mrs X’s share would count in the calculation of her capital. The council therefore requested Mr X provide estate agents’ valuations of the property, copies of Company Z’s accounts and evidence of Mrs X’s share of profits from the property portfolio.
The council also informed Mr X that personal debts were not considered within the financial assessment, a position Mr X then challenged asking the Council to provide the legislation requiring it to ignore debts in the calculation of capital.
Mr X provided sales valuations of some properties and asked the Council to treat the balances of current accounts as income rather than savings. The Council updated its valuation sheet and changed its estimated equity value to £133,500 but it still meant that Mrs X remained a self-funder.
Mr X became increasingly unhappy with the responses he received, accusing the Council of bullying him which he says related to the Council’s tone in correspondence, persistent stonewalling, delays in replying and threats to refer the matter to the Financial Resolution Group. He told the Council that having obtained the information they had requested he intended to ‘drip feed’ it in order to encourage them to address each issue individually. He raised issues with Mrs X’s credit card debt and her director’s loan which he believed should be offset against her equity in the property.
In early July 2021 the Council provided Mr X with an updated property portfolio spreadsheet. Mr X confirmed the calculation methodology was now substantially correct. He provided two further valuations and noted that including these valuations brought Mrs X’s share of the equity on the portfolio below the threshold of £23,250.
The Council appointed Officer 1 as a dedicated point of contact for Mr X and sought legal advice to confirm its approach. Mr X asked the Council to provide copies of their communications with their legal team and questioned their involvement. Mr X made a number of complaints to the council. He thought officer 1 was slowing progress, the equity calculation on the properties was wrong which he believed to be ‘endemic incompetence’, and he thought it was wrong that officers had still advocated sending the matter to the Financial Review Group to consider. The Council did not uphold Mr X’s complaints and discussion ensued throughout 2021 about obtaining further valuations of the properties.
By mid-2022, the Council reached a position where it believed a financial assessment was not possible due to Mr X’s refusal to engage and at that point in time Mrs X would need to reimburse them a total of £50,066.05 for care already provided. The Council said it would continue to arrange Mrs X’s care until 10 June 2022 to allow Mr X time to set up alternative arrangements. Mr X was advised to contact the Credit Control Team to discuss repayment options.
At this point Mr X asked the LGCSO to investigate, wrote to his MP and also instructed solicitors on the matter. It also confirmed it would continue to fund Mrs X’s care package, on a without prejudice basis, until it had received the valuations and reviewed the case. The Council instructed the District Valuer to carry out independent valuations of each of the properties to assess the value of Mrs X’s interest in them. There was a cladding issue reducing the likely value on at least one property, and a debate about how unattractive the properties were, which delayed things further.
What was found
In response to the LGCSO investigation the Council stated that it was unusual to find anybody with more than one property seeking financial assistance with their care. Therefore, it would normally instruct them to provide 3 valuations and then take an average. However, as Mr and Mrs X owned 8 properties, they only asked for a single valuation on each rather than 24 valuations. The Council realised it should have asked for 3 from the outset. The Council questioned Mr X’s initial valuations, the instructions to estate agents and instructions to them.
The Care Act, Regulations and statutory guidance do not specifically cover how a local authority should assess a collection of property investments and case law on this area is limited. The Council maintained it was not obliged to assess the value of the properties as a whole, offsetting negative equity in one against positive equity in others, as Mr X suggested, but that mortgage debt in relation to a property would be assessed against the value of that property.
The Council used internet estimates to compare against the valuations Mr X had provided accepting these would not be as detailed or take into account the full range of factors which might impact on a property’s value. However, they were considerably higher than Mr X’s valuations.
The LGCSO considered that although Mr and Mrs X wanted valuations to be based on current valuations, they should reflect property values at the time the financial assessments started. They also recognised that Mr X and the Council had differing views on how any negative equity and Mrs X’s personal debts should be treated in the financial assessment. No provision in the legislation or guidance for unsecured debts to be offset against capital assets, nor provision for debts secured against one asset to be offset against another asset could be found. Mr X argued that legislation and guidance did not expressly preclude this. He instructed his solicitor to challenge the legality of the Council’s position and anticipated that this issue will now be resolved by the court.
The LGCSO found that delays in resolving the dispute regarding the calculation of Mrs X’s assets and whether she is required to self-fund or contribute towards the cost of her care was indeed fault, ass were delays and failings in communication with Mr X. Consequently, the Council agreed to apologise to Mr X and pay him £250 in recognition of the frustration, distress and time and trouble he experienced as a result of the delays.
The LGCSO also recommended that the Council complete Mrs X’s financial assessment within two months and confirm Mrs X’s care charges since Oct 2020.
Points to note for councils, professionals, people using services and their carers, advocacy groups, members of the public.
The LGCSO has found fault in the delays caused by the Council’s approach, but not in its calculation of capital or the contribution toward care fees. There is acknowledgement that there is not guidance or caselaw that helps with this specific situation and so it comes down to how well the Council have adhered to basic public law principles in their approach.
As always, the LGCSO reminds us that the organisation is not an appeal body and cannot criticise a council where officers have followed the correct procedures and reached a reasoned decision. The LGCSO’s role is not to assess Mrs X’s finances or to determine the extent to which she should fund her care, because that is the Council’s job. The LGCSO only considers the process followed by the Council in doing this.
The Council’s own Care Charging Policy aligned with the Care Act statutory guidance which sets out how a council should calculate the value of capital. It states the valuation must be the current market value minus:
- 10% of the value if there will be actual costs involved in selling the asset; and
- any outstanding debts secured on the asset, for example a mortgage.
There was acknowledgement from the Council that it did not normally encounter owners of multiple properties and so in order to make a decision it was applying the above guidance to each property individually.
It had considered the debts owed in respect of each property solely against the valuation of the property against which the debt is secured. Mr X argued the Council should assess the valuation of the portfolio as a whole with the total negative equity being assessed against the total valuation. He asks the Council to highlight the legislation that says they ought NOT to do this, whereas the discretion to charge enables them to take whatever they like subject to financially assessing in accordance with the rules. So on the surface, at least, they don’t NEED to point to a rule precluding them from treating the properties individually, in order to contend that they may in fact do this.
In principle, a loss on the sale of any property would be offset against a profit on another for tax purposes, we think, so we think that the council may well be wrong about its stance against netting off negative equity against positive equity.
On personal debt it seems obvious to us that personal debt must be allowed to be paid off, before a person’s assets are assessed. If one would pay off a debt from capital, then the capital must be seen to be reduced, whether or not the debt is secured – anything else amounts to saying that the cost of care is a secured debt, or a preferred debt, in ranking, and there is nothing in the law any longer to make that the case.
Conversely it can be argued that it is entirely reasonable and fair to expect Mrs X to sell a property that does have sufficient equity in it, in order to pay for her care rather than expecting this to be met at public expense.
Mr X has instructed solicitors and his next step would be judicially reviewing the Council’s approach if he still feels they have failed to act legally, reasonably, fairly and rationally.
Error of law, in relation to construing the capital asset assessment rules, is a ground for judicial review, which is why that remedy goes further than the LGSCO can possibly go.
Since though, the regulations about financial assessment themselves allow for discretion, and we don’t know what the difference in approach MEANS for the maths and where the different ways of calculating her position leave her in relation to £23250, it may be that a court would say that regardless of what is right or wrong about the accumulator approach to valuing the properties, the council has not made any error that affects Mrs X’s full cost paying status.
The report found that valuations should be done for the time the financial assessments started and we think this is correct, in legal terms. “The Council is assessing the extent to which Mrs X should fund/ contribute towards the cost of her care since October 2020. The assessment should therefore be based on the value of Mrs X’s capital at that time, not its current value. However, I recognise the current valuations will be relevant in establishing any changes in Mrs X’s finances which may affect her contribution.”
Where this Council did let itself down, is with maladministration in relation to delays and communication and these are the areas in which the LGCSO has found fault and not the decision-making process itself.
We think that this sort of matter would benefit from early neutral evaluation, whereby the parties agree to settle on a statement of facts and then send instructions to a lawyer with expertise in the area for a prediction of what the court would say, when Mr X challenges the charges or the council sues him for Mrs X’s debts if he had power of attorney or deputyship or is appointed executor of her estate.
The complainant insisted on knowing if there was legislation requiring the council to ignore debt as relevant to evaluation of one’s assets. There is no such legislation or even Guidance suggesting that they should. We think he would have been better off asking for any legislation to allow the council to ignore the existence of debt, because all charging for care, even for residential care, is discretionary now, and discharging a debt that has been incurred previously, is simply not mentioned. We think – simply by reference to general principles that it can’t be wrong or signify nothing that a person has paid off validly incurred debt. If a council could treat it as deprivation of assets or in some other way count it towards a total, even though it has been spent, that would be tantamount to claiming that one’s charges for care are specially secured in some way which they are NOT. Not since HASSASSA unilateral legal charges were abolished!
At least the Care Act means that she still gets the care that she needs, paid for by the council.
The full Local Government Ombudsman report on the actions of Lincolnshire Council can be found here: https://www.lgo.org.uk/decisions/adult-care-services/charging/22-002-189