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TENANCY AGREEMENTS – CAPACITY TO SIGN?


By Thomas Lumsden
| 11 April 2013

Problems can arise for care home operators where residents who lack capacity are asked to sign tenancies.

Generally, the law presumes that an adult has the right to make decisions and the legal capacity to do so, unless it is shown otherwise. Without going into detail, mental capacity is the ability to understand and retain information and make decisions based on that information. Capacity is a difficult issue, as it varies depending on the situation, and may change on a daily basis.

Where there is any doubt as to whether or not an adult has capacity to sign a tenancy, it is always best to seek a doctor’s opinion. Otherwise, the tenancy may be challenged at a later date, on the basis that the resident had no capacity to enter into tenancy in the first place. The consequences could be significant – for example, the care home’s right to recover payments under the lease could be challenged. Furthermore, there could be difficulties enforcing the covenants on the part of the resident.

There are often cases where new residents require urgent admission to homes. If the resident lacks capacity, it is essential to protect the care home’s position, that the tenancy is lawfully signed and entered into, at or before the time they are admitted to the accommodation. This means that tenancy must be signed on behalf of the resident by either (a) a lawful attorney (usually under an EPA – Enduring Power of Attorney or an LPA – Lasting Power of Attorney) or (b) a Deputy or authorised person appointed under an Order of the Court of Protection.

There are a number of things that you will need to check before allowing the attorney to sign:

  1. Has the EPA/LPA been registered with the Office of the Public Guardian? The attorney will not have authority to sign unless this is the case. If the document does need to be registered, then this could delay matters as registration is likely to take a minimum of three months.
  2. Does the EPA/LPA limit the authority of the attorney? The donor may have restricted the attorney’s remit as to what decisions they can make and implement. You should check the document carefully to see whether this is the case.
  3. If two or more attorneys have been appointed, are they appointed jointly or on a joint and several basis? If the former, then all attorneys must sign the tenancy; if the latter, then only one attorney may sign the tenancy.

If an attorney has been appointed under an EPA/LPA then, as long as the three points above are answered correctly, this should simplify things greatly, as the resident will have already appointed someone to deal with matters for them.

Unfortunately, not everyone will have had the foresight to put in place an EPA/LPA. There may be a number of factors for this, such as the cost, the complexity or simply a reluctance to consider the situation.

If this is the case, then the Court of Protection is the only route available to ensure that someone has the authority to sign the tenancy agreement. The first point to consider is whether the resident is self-funding or Local Authority funded, as this will effect the application made to the Court.

For self-funders, an application will need to be made by a close relative to be appointed as the resident’s Deputy. A Deputy is very similar to an attorney, in that they have the power to make decisions on behalf of the resident, while acting in their best interests. However, one difference is that, because the Deputy is appointed by the Court, their actions are scrutinised more closely. Furthermore, it can take much longer for a Deputy to be appointed (four to six months); the Court fee is £400 per application; and professional fees can be considerable.

Although it will take four to six months for the Order to be issued by the Court, it is possible to make an interim application so that the proposed Deputy is authorised to sign the tenancy agreement by the Court before the final Deputyship order is made.

Even if the above route is followed, some operators allow the resident to be in occupation without a tenancy agreement being signed, a position which should be avoided at all costs. There might be some comfort for home operators who find themselves in this situation, under the Mental Capacity Act which states that:

(1)    If necessary goods or services are supplied to a person who lacks capacity to contract for the supply, he must pay a reasonable price for them

(2)    ‘Necessary’ means suitable to a person’s condition in life and to his actual requirements at the time when the goods or services are supplied

This might seem to cover the intervening period between admission and the tenancy agreement being signed, but offers little protection in our opinion, as for example, the relevant person’s view of a ‘reasonable price’ may be very different to those of the care home operator. Furthermore, the Act says nothing about the resident complying with the tenancy covenants and conditions.

For residents being funded by the Local Authority, a slightly different approach can be adopted. Rather than making a full Deputyship application, an order can be sought from the Court to simply authorise a relative to sign the tenancy agreement on the resident’s behalf. This will still attract a standard £400 application fee but the amount of information required to complete the application is significantly less and it should, hopefully, take the Court less time to approve it.

Care home owners and managers may sometimes find themselves in the situation where they have a number of residents in occupation who do not have validly signed tenancy agreements. The Court has reacted to this situation and has introduced a procedure where the owner or manager can themselves make an application ‘en masse’ on behalf of the residents’ family. Although the application is made by the owner/manager, the Court is still asked to authorise a family member to sign the tenancy agreement on the resident’s behalf.

In conclusion, there is significant risk in allowing residents to occupy without having in place a valid tenancy agreement. If the resident does not have capacity, then the first port of call should be to check whether an attorney can sign on their behalf.

If an attorney has not been appointed, an application will need to be made to the Court of Protection so that a family member is either appointed as a Deputy (in the case of self funders) or authorised to sign the tenancy agreement on their behalf (in the case of residents funded by the Local Authority). If there is an intervening period where a tenancy agreement is unsigned with the resident in occupation, the care home’s position is far from ideal, and operators who allow this situation to arise do so at their own risk.

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