10.2 Financial information and advice and legal advice relating to a Deferred Payment Agreement (DPA)
The Council will provide you information (in general terms) about:
- Types of financial security for a Deferred Payment Agreement (DPA)
- The maximum amount that can be deferred (the equity limit) and what happens once the equity limit is reached
- How interest and administration costs are charged
- What happens when the DPA terminates, options for repayment and what happens if you do not repay the amount due
Equity limit is the term used to describe the maximum amount which you can borrow under a DPA. This maximum amount is calculated by taking the value of the property and reducing it by 10% (or if the property is owned by more than one person the amount equal to their percentage ownership of the property, for example, if the property is owned by 2 people 5%); and a fixed amount equivalent to the lower capital limit70 .
An example calculation is below.
| Property value | £200,000 |
| Less 10% | -£20,000 |
| Less fixed amount | £14,250 (lower capital limit) |
| Equity limit | £165,750 |
Legal charge
A legal charge is a legal document held by the Land Registry which is registered against your property when someone other than the registered owner(s) of the property wants to have it legally acknowledged that they have a financial interest in the property.
A legal charge in favour of the Council would need to be repaid on completion of the sale of the property, or on your death, so that the Council can arrange to remove their charge with the Land Registry.
The Council must obtain a first legal charge, this means that the Council will be paid first when the property is sold. A legal charge can only be registered by the Land Registry if:
- All the property owners’ consent
- The property is registered at the Land Registry
- There are no leasehold restrictions, or, if there are, the head landlord/freeholder agrees to the legal charge
- Any charge already secured signs a deed of postponement
The Council advises you to obtain independent legal advice before entering into the legal charge.
Solicitor's Undertaking
A Solicitor’s ‘Undertaking’ is a legally binding agreement. The Council may accept a Solicitor’s Undertaking as security against your DPA or if you are provided accommodation in rented supported accommodation, extra care housing schemes or Shared Lives schemes. An undertaking is where your conveyancing Solicitor undertake (commits) to pay the Council the full amount of your DPA debt, usually from the proceeds of sale of your property71 .
The Council will normally agree to fund your package of care and support on the basis of a Solicitor’s Undertaking if you can confirm all of the following:
- The property is on the market and you have a prospective buyer
- You have instructed conveyancing Solicitors
- The instructed conveyancing Solicitors can confirm that completion of the sale will occur within 6 weeks
If the Council cannot confirm the above, you will be required to enter into a DPA irrespective of the potential sale.
If the sale falls through you will be expected to enter into a DPA.
If you ask the Council to obtain a Solicitors Undertaking, you will be charged an arrangement fee of £250.00 plus VAT72 .