Competition and Markets Authority (CMA) charging for accomodation and service after death – Analysis by Paul Ridout
21st Century regulators have shown a desire to widen the scope of their regulatory activity. This inevitably leads to allegations of multiple/overlapping regulation. That has long been regarded as bad regulation.
Health and Social Care is one of the most heavily regulated sectors in UK Business. The CQC are all present and very powerful. There is no need for any other body as the CQC is experienced and well resourced to address issues in an informed manner. Social Services Departments are quick to extend their Safeguarding and Contract Management roles so as to trespass very obviously on the CQC territory.
So it was with some concern and no little dismay that we saw CMA appear to muscle in on the territory in the guise of the protection of consumer rights.
Although CMA have tried to embrace the “consumer” rights of care home residents whose accommodation and care are contracted by Local Authorities, the reality is that their jurisdiction can only seriously apply to independently contracted services.
These are not single purchase or short term service agreements, as is typical of standard consumer goods and service agreements. The arrangements are usually medium to long term and are very significant contracts involving significant and ongoing customer investment. Those who choose to purchase are making significant commitments and these commitments are not entered idly but with careful consideration and no small amount of both family and professional advice. In fact, for those who do or may lack capacity, the agreements are often made by lawyers acting under Lasting Powers of Attorney.
Within the independent market there is a strong availability of supply. Customers have wide choices as to which care service they will select. The basic underlying contracts are not complex in principle and it is relatively easy to identify those few areas where the potential for unforeseen consequences may need to be carefully explained in advance.
The remedy for someone aggrieved, by terms in a consumer contract argued to be unfair, is to invite the appropriate court to strike out the relevant clauses as unenforceable.
The CMA has decided to try to shape the market with a high profile marketing campaign desired to label particular clauses as unfair and then placing huge pressure on care providers to change their terms of business. Naturally this is bound to achieve some traction, as no supplier, let alone a care provider wishes to be labelled as acting unfairly to its customers. But; is this a justified approach?
The CMA has picked on two particular types of clause for this high level interference. First there is the requirement for would be customers to pay a fixed sum in advance to secure the right to place at the service. It is very difficult to see how such a term announced clearly at the very beginning of a relationship could be said to be unfair any more than any clause which imposes a financial obligation. If the perspective customer perceives value in a so called “joining” fee and pays – why on earth should that be successfully challenged. Of course it is a different matter if the requirement is sprung at the last moment or, even worse, introduced as a charge after contracts have been closed. Second the CMA has taken against the charging of fees for a period after death. Of course it presents a lampoonable picture of charging a dead person for services. However, there are many examples where ongoing liabilities survive death as a claim against an estate e.g. property rent. No one would suggest that such a charge was unfair if the customer simply decided to leave without notice. It is only the context which changes the perception. The DTI, as it was, approved 28 days as a charge some 15 years or so ago. There is an unexpected interruption of income which the provider needs to cover. We do not think that such clauses would be doomed to unenforceability when clearly and simply explained before commitments were concluded.
There may lie the answer. We suspect this is not so much as consumer outrage at the particular clause, but, rather, a reminder that care contracts, like any contracts, must be transparent and must be clearly explained to potential customers prior to commitment.
CMA sensibly advocate various methods to ensure that prospective residents understand terms and particularly onerous and unusual terms. This includes – clear announcement on the website and other publicity outlets; clear briefing to first line staff; ensuring that first line staff explain the obligations on first contact and regularly throughout negotiation; and clear and plain English documentation.
We have long thought that providers give much too little attention to ensuring that contracts are explained and negotiated carefully, and, usually, with the benefit of professional advice.
Providers will wish to reconsider all the terms of their contracts to ensure that they meet modern expectations of fairness and transparency. Particularly we would recommend re-examining the clauses which have been highlighted by CMA. One must look at the provider risk which the proposed clauses seek to address. In the case of “up front” payments and “after death” liabilities, both are aimed at protecting the business from unexpected costs and losses. Both are aimed at maximising revenue – generation opportunities. There are other ways to protect against these risks and to grasp the opportunities. Providers should be creative in the way in which they address this changing background.
However, a number of scenarios will be particularly vulnerable to legal criticism.
• Contracts presented at the last minute before admission
• Contracts not properly completed at all or, if so, very late after admission when the resident and their family are more vulnerable.
• Lengthy small print Terms and Conditions particularly where onerous previsions are squirrelled away
• Excessively long forms of contract
• Contract containing large amounts of legalese or technical language
This situation can occur quite easily, particularly where contracts and contract provisions have been used and not reviewed for long periods of time.
Payments after death have grabbed the headlines, but, the real issue is an open and transparent contract leading to agreement recognised to be understood and of mutual benefit to both parties.
Providers should no panic to take short term steps to award this unwelcome scrutiny, but, rather take a long term view of the important process which underpins the sustainability of the underlying business.
It is well worth spending time and money getting their contract process right.
Remember that each contract for an independently funded resident may be worth between £50 thousand and £100 thousand pounds per annum. There are significant business amounts, well worth carefully preparing and nurturing.
More information at www.ridout-law.com