Deferred payments

The council must offer a deferred payment to you if you have adequate security (by the council obtaining a land registry charge on your property) and you:

• Are ordinarily resident in Southampton
• Have capital, excluding the value of your home, of less than £23,250
• Have been professionally assessed and have an eligible unmet need for care and support, and that need is to be met in a permanent residential or nursing care home
• Own or have part legal ownership of a property (which is not benefitting from a property disregard), which must be registered with the Land Registry. If the property is not, you must arrange for it to be registered at your own expense
• Have mental capacity to agree to a deferred payment agreement or have a legally appointed agent willing to agree to this
• Have no other beneficial or legal interests on the property, for example mortgages, equity release schemes, or secured legal charges

The council has discretion to approve a deferred payment agreement in other circumstances, even if the above criteria have not been met.

Whilst in the agreement you will also need to:

• Have a responsible person willing and able to ensure that necessary maintenance is carried out on the property to retain its value. You are liable for such expenses
• Insure your property at your expense, and supply us a copy of the certificate. Please note that the policy must show that the property is insured as unoccupied if there is no one living in it
• Pay your assessed financial contribution to your care in a timely and regular manner

If you fail to pay your financial contribution, the council reserves the right to add this debt to the loan amount or terminate the agreement completely.

Yes. Even if you meet the criteria, the council may refuse your application if we decide it is unlikely the debt will be repaid. Possible reasons for this may be that:

• The council is unable to secure a first legal charge on your property
• You are seeking a top up and there is insufficient equity and/or
• You do not agree to the terms and conditions of the legal agreement, called the Deferred Payment Agreement (DPA)

The council do have the right to turn down a request, but in these cases the reason will be given to you in writing. You will be advised on how to appeal against the decision, if you wish to do so. Please note you may be liable for elements of the administration fee even if an application is declined. 

Deferred payments are effectively a loan to be repaid when your property is sold, or you die. However, the scheme does not work in exactly the same way as a conventional bank loan.

Instead the council will pay the full cost of your care to your residential home on a monthly basis, for as long as necessary, providing there is enough value left in your property to cover these costs.

You will still be financially assessed and have to pay a weekly client contribution towards your care during the period of the deferred payment.

You will be assessed to decide what you can afford to pay and the council will pay the shortfall. The part the council pays is your ‘deferred payment’. The deferred payment builds up as a debt which must be repaid when your home is sold.

Many people sell their home either immediately or later on. However, you do not have to sell your home if you do not want to during the period of the deferred payment.

You may for example, with the council's permission, decide to rent it out to generate income.

If you do this, the income must be declared and used to contribute to your care home costs. This will reduce the amount of deferred payment which has to be repaid when your property is sold.

The council will obtain one professional valuation of your property from a qualified surveyor to calculate the amount available to fund your care.

This will be the share of the property you own (where there is more than one owner), minus 10% allowance for sale costs and minus the lower capital limit of £14,250.

For example, if you own half of your property with a partner, valued at £200,000, the equity would be calculated as follows:

• Professional valuation of property: £200,000
• Your 50% share: £100,000
• Minus 10% allowance for sale costs: -£10,000
• Minus lower capital limit: -£14,250
• Equity in the property: £75,750

For a deferred payment to be considered, there should be no other beneficial or legal interests on the property, for example mortgages, equity release schemes or secured legal charges.

Most Local Authorities will be charging administrative fees and interest.

Southampton City Council charge an administrative charge of £990 which must be paid when you submit your application. Alternatively, you can add the £990 to the loan, but this will incur interest.

The council charges interest on the deferred amount for the whole period that the agreement is in place. The interest will form part of the total overall amount owed to the council. The council will charge interest at the maximum government approved standard interest rate, which is uprated on 1 January and 1 July.

On the anniversary of the agreement, and each year thereafter, a maintenance charge of £200 will become due for payment to cover the ongoing costs of managing the loan.

Once the value of the loan has reached 80% of the available equity, according to the original property valuation, a new valuation will be required, and you will be expected to pay an additional £200 for this service.

When the agreement has come to an end, a closing invoice will be raised for the deferred loan. You will need to pay this within 56 days (8 weeks) of the invoice date, otherwise you will be charged late payment interest at a rate of 4% above base rate.

If you need to sell your home to pay for care, you will have a ‘breathing space’ of 12 weeks starting from when you moved into your permanent care home.

During this time, your property is disregarded and you only have to pay your invoiced client contributions as opposed to the full cost of your care. This only applies if you have less than £23,250 in savings.

After 12 weeks, or until your property is sold if quicker, the amount you have to pay will be re-calculated to take the value of your home into account.

If you are not able to sell your home within the 12 week period, then you can apply for the deferred payment scheme. A member of the Finance Assessment Team will be able to provide you with more information regarding this.

If you decide to use the deferred payments scheme, you will need to complete a written application form.

If the council agree in principle to accept your application, we will ask you to sign a written legal agreement and a legal charge which will be registered with the Land Registry to safeguard the loan.

If your property is not registered with the Land Registry, you will need to apply to get it registered at your own cost before your application will be considered.

The legal agreement clearly sets out the terms and conditions and information necessary for you to understand your rights and obligations under the agreement.

You will be advised to seek your own legal and financial advice prior to signing the agreement.

You can end the agreement at any time and the loan will then become repayable immediately. Please note that you will then be responsible for paying the care home directly.

The agreement will also end if you die, sell your home, or if you have not sold your home and the value of the property is not enough to cover your care costs.

Once the agreement has come to an end, a final invoice (also known as a closing invoice) will be raised and you will have 56 days (8 weeks) from the date of the invoice to repay the loan.

If the loan is not repaid within this time, you may incur late payment interest charges for each day the invoice is overdue. This will be charged at 4% above base rate. The council may also commence County Court proceedings against you which will attract Court fees and costs.

If the agreement ends on your death, the loan becomes repayable 90 days later.

If the loan is not repaid within the agreed time, the council may commence County Court proceedings against you. These proceedings will attract court fees, costs, and interest at the County Court rate.

Many residential homes charge a supplement or ‘top up’ for their better rooms.

If you use the deferred payments scheme, you can apply to add the cost of the ‘top up’ payments to your deferred payments scheme loan if the council agrees that there is enough value in your home.

The first step is to complete the deferred payments application form. Alternatively, this can be obtained in paper format from the Financial Assessment and Benefits (FAB) Team or Customer Payment & Debt Team (see contact details below).

Please complete and send all the required documentation to:

Customer Payment & Debt Team, Southampton City Council, Civic Centre, Southampton, SO14 7LY

You can request a paper copy of the application form by:

• Telephone: 023 8083 3003, option three, Finance and Benefits Team 
• Email: cpd.deferredpayments@southampton.gov.uk, Customer Payment and Debt Team

Acceptance of any application under the scheme is subject to you meeting the criteria for entering the scheme, and the council being able to obtain sufficient security on your property.

The Customer Payment and Debt Team will advise you if your deferred application has been approved in principle.

You are strongly recommended to take independent legal and/or financial advice before you sign the deferred payment scheme application form and supporting documentation.

There are a number of places where you are able to get independent financial advice to help you make the right decision for you. Some of the places where you can receive independent financial advice are:

Citizens Advice Bureau (0808 278 7863)
Society of Later Life Advisors (SOLLA) (0333 2020 454)
Southampton Advice and Representation Centre (023 8043 1435)
Southampton City Council Welfare Rights Money Advice Service welfarerights.advice@southampton.gov.uk
Spectrum Advocacy Service (023 8033 0982)