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CMA - Charging fees post death in care homes

29 January 2018

The CMA reported last week that Maria Mallaband have voluntarily given an undertaking in response to a consumer law investigation to not enforce the terms in their agreements requiring the payment of residential fees after the date of a resident’s death. Previously, the group had charged up to one month’s payment of fees in full following the date of death.

The CMA also released draft consumer law advice which is out for consultation until 5pm on 16 Feb and recommends the following:

  • fees payable following self-funded residents’ death should be limited to a 3 day period or until the room is cleared (although alternative longer periods are also considered);
  • recovery of FNC contributions following the death of a self-funded resident should cease on the date of death;
  • recovering top up fees for a publicly funded resident from their relatives or estate should cease when the local authority fees cease.

The guidance is based upon the Consumer Rights Act 2015 (CRA) and Consumer Protection for Unfair Trading Regulations 2008 (CPRs). Prior to the CMA investigation few operators considered the applicability of consumer laws to residents and patients rarely viewing them as ‘consumers’. Furthermore, many advisors who were aware of the CRA would have relied on the CRA exemption that the fairness test does not apply to the main subject matter of the agreement which they believed included price/fees. The CMA believes this exemption cannot be relied upon as fees after death are not the main subject matter and are contingent on the death of the resident. They are therefore not concerned with the level of fees, which is outside the advice, but the period of time for fees to continue to be paid.

The CRA applies a test of fairness to terms in a consumer contract, even where those terms are negotiated. A term is unfair if contrary to the requirement of good faith it causes a significant imbalance in the parties’ right and obligations to the detriment of the consumer. Unfair terms or notices are not legally binding and enforcement action can be taken. Where a consumer has paid money, this money is recoverable and orders can be made to refund such sums. The CRA also requires contract terms to be “transparent”.

The CRA also contains a Grey List of terms which may be unfair and therefore are not subject to the exemption. Terms requiring a consumer to pay fees for services not provided are fully subject to the fairness test – for this reason the CMA believe that top up and FNC payments should not be payable post death as they represent fees for clinical services which are not being provided.

The CMA believe that a fair compromise is for care homes to remove residents’ belongings after a reasonable time, they suggest 3 days, and thereafter charge for storage. The CMA propose £20 per day as a reasonable charge for such storage. The CMA also accepts that ultimately the home may have no choice but to sell uncollected possessions but all proceeds minus costs should be accounted for to the resident’s estate. They do not sate what the period should be before sale but the proposed draft clauses suggest one month.

Passing on FNC payments to the resident’s estate is viewed as an unreasonable price increase for services not provided and is again subject to the fairness test. The CMA believes these payments would not have been transparent to the resident or their agent. The CMA state that many residents will not fully read the contracts and are usually unable to shop around given the necessity to find a place often at a time of distress. They therefore believe there is an inherent imbalance between the “consumer” and the care home operator.

Once the final advice is issued care home owners should review their standard contracts both against the advice and the grey list in the CRA more generally. In the meantime, Care Home operators should be wary of charging fees for more than three days, especially if the resident’s belongings have been collected and should not seek to recover FNC payments or top up payments from resident’s relatives or estate. Operators should also respond to the consultation, given that relatively few responded to the initial investigation, particularly in respect of whether they believe the proposed 3 day period is reasonable.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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