Patricia is a consultant in Foot Anstey’s mental capacity team and specialises in Powers of Attorney, Court of Protection work and legal issues relating to the elderly and vulnerable. She is also a Panel Deputy for the Office of the Public Guardian one of only 71 people throughout England and Wales.
As Professional Deputies for property and finances, one of the matters that we will often have to deal with is an Application to the Court for permission to buy and sell property. The clue is in the title of our position – A Deputy for Property and Finances.
Buying a house is one of the most stressful experiences for any of us; one of the three most stressful life experiences alongside divorce and dealing with a bereavement. So, for those of our clients who lack capacity, the experience can be even more daunting. Our clients range in age from “cradle to grave”. At one end of the spectrum we will be dealing with clients who have suffered a birth injury and will have a substantial clinical negligence settlement. At the other end of the spectrum we act for a number of elderly clients who may be either downsizing, or going into a full time care situation, so there is sometimes a need to sell the property to assist with the payment of care fees. There are any number of circumstances in between – selling to buy an alternative property, renting a property until the litigation has been settled, buying and adapting property as part of a settlement or beyond, buying a holiday home to be adapted for the disabled person as part of their investment portfolio. The sharing of property with other family members and their contribution to the purchase price also needs to be taken into consideration, with the preparation of suitable Declarations of Trust, and restrictions to be included on the Land Registry documents.
Where we are appointed as a Deputy to deal with property and finances, in many cases the clients we are looking after cannot really understand the decision about purchasing a property, but where there is any indication of compromised or fluctuating capacity, there should always be a discussion about it with the person concerned. The principles set down in section 1 of the Mental Capacity Act (the Act), together with the steps to be taken in sections 2 and 3 are well rehearsed, as is the “best interests” guidance set down in section 4 of the Act, and the Code of Practice.
In order to establish capacity to purchase a property and deal with financial affairs, the test is to be carried out by reference to the particular person, and their particular circumstances, in relation to the decision about property and affairs, at the time that the decision needs to be made. Would they understand how the price of the purchase relates to the extent of their overall estate as a whole? Would they understand the nature and extent of the expenditure and liabilities that come with property ownership? Are they likely to have any significant changes in their own financial circumstances which could influence the decision?
Buying and selling property also involves creating and signing a contract with the other party. For this, an assessment of the person’s capacity is also important as part of the overall property transaction. The Deputy/Attorney should be ensuring that the person understands:
- The identity of the other party to the contract;
- How much has to be paid, or is being paid;
- When the payment will be made or received;
- What property is being sold or purchased in exchange;
- Any important Terms and Conditions, and covenants which affect the client’s rights and liabilities;
- The timing of the contract – the implications of exchange and completion;
- The method of communication between the parties;
- Any opportunity the client has to reconsider the contract before exchange has taken place.
Sometimes, we are asked to act for Attorneys appointed either under an Enduring Power of Attorney or under a Lasting Power of Attorney for property and finances, so in those cases an establishment of the capacity of the donor of the power will be important.
If the person does have an EPA or an LPA (Property and Finances) and it has been registered with the Office of the Public Guardian, then the Attorney will usually be allowed to buy a property on behalf of the donor. The Attorney will need to check the Power of Attorney document to make sure that no restrictions or conditions around buying and selling property have been included.
If there is no Attorney, and the person does not have capacity to act, then an Application will have to be made to the Court of Protection for a Deputy to be appointed. The Deputy can be a family member, but in the context of large personal injury and clinical negligence settlements, it is more usual for a Professional Deputy to be appointed to act. This is also the case where there is a dispute between family members, and a Panel Deputy can act for the Court in getting a property bought or sold, as required.
The first thing we have to do as a Deputy for property and finances, when considering the sale or purchase of property, is to check the Order. Whilst First General Orders can be phrased quite widely, there are often restrictions included about buying or selling property, and the Court will then require a further Application to be made to them to go forward with a transaction.
One of the main issues with the Applications to the Court on specific property matters is that it is time consuming and expensive, as the Applications can take months to deal with. Six months is a typical time, and sometimes longer depending on what you are asking for. In real terms, this could mean that the client can miss out on a particular purchase.
A formal Application for a purchase can sometimes be avoided where the purchase is made pursuant to an interim payment by a Defendant in a personal injury or clinical negligence claim. The Civil Courts in which the claim is made may authorise the release of funds to a Solicitor to apply towards the purchase. What sometimes happens is that the purchase can take place, even while the Deputyship Application to have a Deputy actually appointed is ongoing. Once the Deputy has been appointed, we would then advise the Court of Protection about the Order in the civil claim, so they can make sure that they are happy with it, and do not need to make any further Orders. Where minor children are involved in clinical negligence claims, and an interim Order is made for the purchase of a property, the property is usually purchased in the name of the proposed Deputy and the litigation Solicitor, as Trustees for the child concerned, until the Deputyship Orders are made.
Other important considerations which will also need to be taken into consideration will include the following (but the list is not exhaustive):
- Why does P wish to move?
- Will the new property and the benefits of the same outweigh taking P from his familiar surroundings?
- Is everyone in agreement that P should move?
- How accessible is the property for everyone concerned?
- Will adaptations be required, and if so what will be the cost of these?
- Is there independent evidence to support the move, e.g. a suitability report in a litigation matter?
- Has an Occupational Therapist looked at the property to consider its suitability?
- Is the property affordable?
- Will there be enough money left over for adaptations and all the running costs and household bills, once it has been purchased?
- Will others be residing in the property as well, e.g. parents, spouse, children?
- Will there be part of the property required to be adapted for carers?
- Have others contributed to the purchase price (this will require a Declaration of Trust)?
- Will those residing with P be contributing to the running costs (the OPG/COP are looking at these arrangements closely)?
- Is the price reasonable and have appropriate surveys and searches been carried out?
- Is P purchasing the property alone, or with someone else who will be a co-owner (a Declaration of Trust is relevant here)?
- Has a detailed budget been prepared showing the cost of the purchase, including stamp duty, the adaptations costs, land registry fees and all incidental costs?
The Court will therefore require as much detail as possible about the new property and the circumstances pertaining to it for the client. If there are any disputes about the property matter, e.g. if there is disagreement about the client moving/selling then the Court will get involved in making the decision, and in that situation the Official Solicitor would normally get involved to represent P.
If a person is acting under an LPA and EPA, and does not need to make an Application to the Court, it will still be their duty to act in P’s best interests and to consider all the appropriate factors.
If an Application to the Court is required then a specific Order will be made by the Court which will deal with the provision of the purchase money, and any release of funds from the Court, as well as for the safe custody of the Title deeds of the property.
The Deputy or Attorney will always need to ensure that there are sufficient funds to both exchange and complete a purchase transaction and that the monies will be available in a timely fashion. If funds are on deposit or invested in a Portfolio or other form of account, then it will be up to the Deputy or Attorney to make sure they are available for both exchange (the usual 10% deposit) and completion (the balance of the purchase price). Certainly, the Deputy or Attorney would be in breach of contract if sufficient funds are not available in time for completion. That would have financial penalties under the contract for which a Deputy, or Attorney, may be personally liable.
If P is owning the property with somebody else (often the parents) then a Declaration of Trust will be essential, which will set out the contributions that have been made, and the percentages that will be due to P and the co-owners on any subsequent sale of the property. In a situation where P lacks capacity, then the property would usually be held on a tenants in common basis with a restriction entered at the Land Registry.
If P does have any tenanted properties, then the Deputy will need to have a widely drafted general Order that will give authority for such transactions. Where a formal authority is needed in any property transaction, then a formal Application has to be made with appropriate explanation to the Court as to why their authority is required and information which enables the appropriate form of authority to be drawn up. If the Application is complex, or involves a benefit to a third party (for instance a loan on favourable terms) then it will be for the Court to request further evidence or direct that other parties be notified or joined as Respondents.
One of the other important issues that we have to deal with when thinking about property transactions is whether the person we are appointed for lacks capacity and is a Trustee of land (e.g. an elderly spouse co-owns the property with the spouse who lacks capacity) and is no longer able to act. In these cases, the incapable Trustee must be discharged from the Trust and, where necessary, replaced by a new Trustee so that a property transaction is able to go ahead.
If the person who lacks capacity also has a beneficial interest in the property (e.g. a joint property where they have a half share), and the other Trustee remains competent then the competent Trustee can appoint a new Trustee with the permission of the Court of Protection. The Application is made under s36(9) of the Trustee Act 1925. Unfortunately, this is often a separate Application that has to be made to the Court, and stands apart from the general Order under which a Deputy can act. Detailed evidence has to be provided and a fee paid, even if the Application relates only to the sale of land.
There are more complicated Applications that have to be made under the Trustee Act 1925 to the Court of Protection where there is a lack of a competent Co-Trustee, or where there are other trust assets involved. For ongoing Trusts of land we have to also think about retiring and discharging the incapacitated Trustee so a good working knowledge of the Law of Property Act 1925, the Trustee Act 1925, the Trusts of Land and Appointment of Trustees Act 1996, the Trustee Delegation Act 1999 is essential for anyone working in this practice area.
Other matters that have to be considered when other family members share accommodation with the disabled client concern payments of household bills and repairs and maintenance of the property, and also whether the family need to pay rent under some formal arrangement for their occupation of the property. These can be difficult conversations to have with the family and the Office of the Public Guardian are paying much more attention to them when we complete the annual Deputyship Returns.