Circular SWSG13/93 - Community Care: National Assistance (Assessment of Resources) (Amendment) Regulations 1993, Guidance on Charging - Amendment 1

SECTION 7 - TREATMENT OF PROPERTY

General

7.001 If the capital asset is a house or land there are circumstances under which its value must be disregarded indefinitely and circumstances where its value must be taken fully into account. Local authorities also have an element or discretion over whether to take the value of a property into account see 7.007.

Property to be disregarded

7.002 The value of a dwelling occupied by a resident as his home should be ignored if his stay in a residential care or nursing home is temporary and

• he intends to return to the dwelling, and

• the dwelling is still available to him.

Only one dwelling can be disregarded in these circumstances.

NB If the resident’s stay is initially thought to be permanent but turns out to be only temporary, the dwelling he normally occupies as his home should be treated in the same way as if he had been temporary from the outset.

Schedule 4 para 1

7.003 Where the resident no longer occupies a dwelling as his home, its value should still be disregarded where it is occupied in whole or in part by

•the resident’s spouse (except where the resident is estranged or divorced from the spouse/former spouse)

• a relative of the resident who

• is aged 60 or over, or

• is aged under 16 and is a child when the resident is liable to maintain, or

• is incapacitated.

Schedule 4 para 2

Meaning of relative

7.004 The term "relative" in paragraph 7.003 is defined to be any of the following:

A. parent (including an adoptive parent)

B. parent-in-law

C. son (including adoptive son)

D. son-in-law

E. daughter (including adoptive daughter)

F. daughter-in-law

G. step-parent

H. step-son

I. step-daughter

J. brother

K. sister

L. grandparent

M. grandchild

N. uncle

O. aunt

P. nephew

Q. niece

R. the spouse or unmarried partner of any of A to K inclusive.

Meaning of "incapacitated"

7.005 The meaning of "incapacitated" in paragraph 7.003 is not defined in the regulations. It will be reasonable to conclude that a relative is incapacitated if either of the following conditions applies

i. the person is receiving one (or more) of the following social security benefits

Invalidity Benefit, Severe Disablement Allowance, Disability Living Allowance, Attendance Allowance, Constant Attendance Allowance, or an analogous benefit;

or

ii. the person does not receive any of the benefits listed in (i) but the degree of incapacity is equivalent to that required to qualify for one of those benefits. Medical or other relevant evidence may be needed before a decision is reached.

Property acquired but not yet occupied

7.006 Where the resident has acquired property which he intends eventually to occupy as his home, disregard the value of the dwelling for up to 26 weeks from the date the resident first takes steps to take up occupation, or such longer period as is considered reasonable.

Schedule 4 para 16

Discretion to disregard property

7.007 Where the LA considers it reasonable to do so, they can disregard the value of premises not covered in paragraphs 7.002-006 in which a third party continues to live. LAs will have to balance the use of this discretion with the need to ensure that residents with assets are not maintained at public expense. It may be reasonable, for example, to disregard a dwelling’s value where it is the sole residence of someone who has given up their own home in order to care for the resident, or someone who is an elderly companion of the resident particularly if they have given up their own home.

Schedule 4 para 18

7.008 Where the local authority has decided to disregard the value of a property, it is left to the local authority to decide if an when to review that decision. It would be reasonable, for example, where the authority has been ignoring the value of a property because a long term carer was living there, for the authority to begin taking account of the value of the property when the carer dies or moves out.

Property to be taken into account

Legal and beneficial owners

7.009 The treatment of property will depend on whether the resident is a legal or a beneficial owner. A legal owner is a person in whose name the property is held. A beneficial owner is one who is entitled to receive the profits or proceeds of property. In most cases the legal and beneficial owners will be the same person but, where this is not the case, the value of the property will be valued according to the following paragraphs.

Legal ownership

7.010 For the purposes of assessing the resident’s ability to pay a charge no account should be taken of the value of a property where the resident is a legal owner but has no beneficial interest in the property ie the resident is holding the property on trust for the beneficial owners and has no right to the proceeds or profits should the property be sold.

Beneficial ownership

7.011 Where the resident is the sole beneficial owner of a property the capital value should be taken into account in full. If the resident and the local authority agree that the value of the property, after taking into account any deductions in 6.010 (expenses of sale and debts secured on the asset), is over £8,000, or when added to any other capital assets will take the total capital over £8,000, a precise valuation will not be needed. If the resident disputes the value, or there is some doubt as to the value, a professional valuation should be obtained.

Joint beneficial ownership of property

7.012 Where a resident is a joint beneficial owner of property, ie he has the right to receive some of the proceeds of a sale, it is the resident’s interest in the property which is to be valued as capital, and not the property itself. The value of this interest is governed by:

1. the resident’s ability to re-assign the beneficial interest to somebody else

2. there being a market ie the interest being such as to attract a willing buyer for the interest

Reg 27(2)

7.013 In most cases there is unlikely to be any legal impediment preventing a joint beneficial interest in a property being re-assigned. But the likelihood of there being a willing buyer will depend on the conditions in which the joint beneficial interest has arisen.

7.014 Where an interest in a property is beneficially shared between relatives, the value of the resident’s interest will be heavily influenced by the possibility of a market amongst his fellow beneficiaries. If no other relative is willing to buy the resident’ s interest, it is highly unlikely that any "outsider" would be willing to buy into the property unless the financial advantages far outweighed the risks and limitations involved. The value of the interest, even to a willing buyer, could in such circumstances effectively be nil. If the local authority is unsure about the resident’s share, or their valuation is disputed by the resident, again a professional valuation should be obtained.

Example

The resident has a beneficial interest in a property worth £60,000. He shares the interest with two relatives. After deductions for an outstanding mortgage, the residual value is £30,000. One relative would be willing to buy the resident’s interest for £5,000.

Although the value of the resident’s share of the property may be £10,000, if the property as a whole had been sold, the value of just his share is £5,000 as this is the sum he could obtain from a willing buyer.

The amount to be taken into account as actual capital would be £4,500 because a further 10 per cent would be deducted from the value of his shared to cover the cost of transferring the interest to the buyer.

Property held in a shared trust

7.015 Where a property is held in Trust and the resident is both a joint trustee and joint beneficiary, he legally owns the property as a trustee of the Trust, but purely on a "fiduciary" basis ie he is legally obliged to administer the Trust for the benefit of the Trust - as a whole, and not for his own particular purposes. His real interest is that of a beneficial owner, and falls to be valued accordingly (paragraphs 7.012 to 7.014).