A Guide to Deferred Payment Agreements

As more people require residential care in later life, it’s increasingly common for attorneys under Lasting Powers of Attorney (LPAs) to face the challenge of managing care fees when the person they act for (the donor) has limited savings—but owns a property. In such situations, a Deferred Payment Agreement (DPA) with the local authority may offer a practical solution.

In this article, we explain what DPAs are, when they may be appropriate, and how attorneys can navigate the process with legal guidance.

What is a Deferred Payment Agreement?

When someone goes into residential care, and they own a property, the local authority disregards the value of their interest in the home from the financial assessment for 12 weeks from the date the person moves into care.  After that date, the value of the property is included in the financial assessment, and the person in care will be liable for the full cost of their care if the value of their interest in the property is worth more than £23,250.

A Deferred Payment Agreement is a legal arrangement with a local authority that allows a person who needs residential care to delay paying for it until a later date.

Instead of selling their home immediately to cover the cost of care, the local authority pays the fees upfront, and the amount is secured as a debt against the home, together with interest on the debt and administration fees. The loan is repaid from the eventual sale of the property—either during the person’s lifetime or after their death.

The scheme is governed by the Care Act 2014 and is intended to prevent individuals from having to sell their home in distress to meet care costs.

When is a DPA Available?

To qualify for a DPA, certain conditions must usually be met:

The person must need residential care (not care in their own home).

They must have limited accessible assets—typically less than £23,250 in savings.

They must own a property that is not disregarded (e.g. no spouse or dependent relative living there).

The property must be suitable as security for the deferred loan.

The local authority must be able and willing to offer the agreement—which they are generally required to do if the above conditions are met, but in practice, it may still vary.

When is a DPA Appropriate?

A DPA can be a sensible option in several situations:

• The property market is weak, and a sale would be at a loss.
• The donor may return home, even if this is uncertain.
• The family needs time to prepare for a sale – the 12-week disregard is often not long enough to prepare the house for sale, get it on the property market, and to conclude a sale.
• There is emotional or practical reluctance to sell the home immediately.
• The property can generate sufficient income to pay a substantial part of the donor’s care fees.

However, it may not be appropriate if:

• The donor’s property is in poor condition or likely to be hard to sell.
• The amount of equity in the property is low.
• The ongoing accumulation of fees and interest could lead to significant debt.
• The donor’s estate is unlikely to cover the full costs after death.

The Role of Attorneys Acting Under an LPA

When the donor lacks capacity, it falls to their attorney under a Property and Financial Affairs LPA to make decisions in their best interests—including how to pay for care. Entering into a DPA is a significant financial decision, and attorneys should:

1. Ensure the decision is within their authority under the LPA and the Mental Capacity Act 2005.
2. Consider whether they need specific legal advice or authorisation from the Court of Protection (e.g. if there’s a conflict of interest).
3. Obtain a full valuation of the property and clear information about the local authority’s terms.
4. Keep a detailed record of their decision-making process, focusing on the donor’s best interests.

How We Can Help

We work closely with attorneys who are managing complex financial affairs under LPAs. We can:

• Review the local authority’s DPA offer and explain the legal terms.
• Advise on whether the attorney has authority to enter the agreement.
• Liaise with the local authority and complete the legal documentation.
• Consider alternatives such as equity release or sale, if appropriate.
• Apply to the Court of Protection where necessary.

Entering into a DPA is not just a financial transaction—it’s a legal commitment that requires careful thought and sound advice. If you’re an attorney managing these issues, we can help you make informed and confident decisions that are in the best interests of the person you’re acting for.

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.