COURT OF PROTECTION: PROPERTY AND AFFAIRS. number of ways, eg by selling, buying or transferring an interest in it.

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1 COURT OF PROTECTION: PROPERTY AND AFFAIRS SALE AND PURCHASE OF PROPERTY BY P 1. A Deputy or an Attorney of P s Property and Affairs may need to deal with P s property in a number of ways, eg by selling, buying or transferring an interest in it. 2. Under the Mental Capacity Act 2005 ( the Act ), the Lasting Power of Attorney replaced the Enduring Power of Attorney from 2007 when the Act came into force. Any EPA remains valid, however, as long as both the donor and the Attorney signed the document prior to 1 October Where no Attorney has been appointed, a Deputy may be appointed by the Court pursuant to s18(1)(b) of the Act to make a decision in relation to the sale, exchange, charging, gift or other disposition of P s property. 4. An example of an Order of the Court granting the appointment of such a Deputy is appended to this talk. 5. The power of an Attorney to deal with P s property will depend on the terms of appointment granted by the donor. Sale of Property Authority of a Deputy: Property and Affairs 6. In general, a Deputy in respect of Property and Affairs will be granted authority to manage P s property and affairs with the powers of a beneficial owner, which will extend to selling property on behalf of P. Where such general authority has been granted, no application need be made to court to sell P s property, unless the sale poses a potential conflict of interest or is opposed, for example by a beneficiary under P s will. 1

2 7. Where the Deputy does not have authority to sell P s property, an application for permission must always be made to the Court. 8. Even if the Deputy has authority to sell the property, it may be advisable to make an application to court where there is scope for potential conflict of interest. For example, are there relatives opposed to the sale? Does the deputy plan to purchase another property for P which costs more than a personal injury claim that is being made for P? Are there issues in respect of funding long- term care? 9. It is better to bring these and similar questions before the court for a determination at which parties with conflicting interests can have their say; rather than single- handedly carry out a controversial sale and face questions or even claims later. Whether to Sell P s Property: a Deputy s considerations 10. The Deputy must act at all times in the best interests of P. 11. Selling P s property is likely to be a huge decision of very considerable consequence. The decision to do so must therefore be taken with extreme caution. 12. The Deputy must first and foremost and at every step of the decision- making process consider whether the sale is in the best interests of P. Questions she should ask herself include the following. 13. Would P want the sale to go ahead? What are his past and present wishes in the matter? What weight should be given to these? Is it practical or responsible to take account of P s wishes? [See S&S; C v V [2009] WTLR 315 per HHJ Marshall QC at para 75]. What are P s values and beliefs which might affect his views of the sale? 2

3 14. Should the Deputy consult relatives/friends and carers of P, or would this expose the Deputy to pressure from conflicted interests? 15. If the Deputy does not intend to purchase a replacement property, has she fully consulted the relevant medical authorities, or P s carers, in order to satisfy herself that P will not at any time in the future be likely to leave full time residential care? The Process of Sale 16. If P s property is going to be left empty prior to sale, the Deputy should ensure that it is kept as secure as possible and that any valuable items are removed and stored safely. 17. Appropriate insurance for the property must be maintained at all times and the insurance company must be kept fully informed of the status of the property, particularly if it is left empty. 18. Utility and other bills must continue to be paid on the property until it is sold. 19. The Deputy should instruct a suitably qualified solicitor to deal with the conveyance of the property, including carrying out checks on good marketable title and, if the property is unregistered, locating and securing the deeds. 20. The property must be professionally valued and estate agents must be instructed. The terms of agreement must be carefully examined. 21. The property may be placed on the market pending authority from the court to proceed with the sale. 22. If the property is the subject of a specific gift under P s will, such a gift must be set aside under Sch 2 para 8 of the Act. Application to the Court for Sale of a Property 3

4 (i) Pre- Appointment of a Deputy 23. Where a Deputy has not yet been appointed, then the application to Court to do so in form COP1 will need to include details of P s property and estate. Only upon consideration of this information can the court determine whether it is appropriate to give the Deputy the powers of a full beneficial owner, or whether to restrict such powers. 24. If it is considered likely that a property will need to be sold upon appointment of a Deputy, then form COP1A should be filled out at the same time and annexed to the application, giving details of the proposed sale. (ii) Deputy without Authority 25. If a Deputy has been appointed without authority to sell property on behalf of P, then the Deputy must make an application to the court for such authority. 26. If the application is non- contentious, then it may be made in a shortened form pursuant to Practice Direction 9D paragraph 4(e). The application consists of form COP1 and a witness statement providing evidence of P s interest in the property, why it is in P s best interests to sell the property, and what the applicant intends to do with the proceeds of sale of the property. There is no need to inform anyone of the application, unless the court orders, and forms COP1A and COP3 are not required. (iii) Contentious Sale 27. Where the application is contentious, a full application must be made under Part 10 of the Court of Protection Rules. An application may be contentious because P or a member of P s family does not agree with the sale, or members of P s family have an interest in the property for example under P s will. 4

5 28. The application must include evidence as to P s lack of capacity to make the decision to sell the property; whether P is able to consent to the sale; likely objections to the sale; whether there are grounds that P should remain living in the property; the value of the property; whether and why the property is being sold at an undervalue and who in those circumstances is set to benefit. 29. The application must also include details of anyone who should be informed of the application or joined as a party. 30. The court will determine upon the application being made whether or not a hearing is required. The Court may make an order authorising the Deputy to sell the property and directing how the proceeds of sale should be dealt with. Procedure Upon Order for Sale 31. Once the Deputy has obtained the authority of the Court, if required, she is free to negotiate the sale of the property and to agree terms of contract. She must act at all times in the best interests of P and seek as a prudent seller to obtain the best possible price. 32. To this end, she should obtain three independent estimates of the value and if necessary, (for example if those estimates vary widely) an estimate from an independent surveyor. It is no longer necessary to obtain the approval of the Court on the value of the property. Contract for Sale 33. The Court of Protection is no longer required to approve the contract of sale. The contract is entered into by P acting by the Deputy, or other authorised person, pursuant to an Order of the Court of Protection dated No reference should be made to P s lack of capacity, and the address given should be that of the Deputy. 5

6 34. In addition to the standard conditions of sale, the contract should include the following special condition: Copies of the said Order have been supplied to the buyer s solicitors and shall be deemed to be conclusive evidence of the seller s authority to sell. The buyer and [his/her] solicitors shall not be entitled to raise any requisition or objections thereto. 35. The contract may then be signed by the Deputy, followed by the words: as Deputy for [P]. Contracts may then be exchanged in the usual way. After Exchange of Contracts 36. If necessary for the expedience of a sale at a reasonable price, there is no reason why the Deputy should not grant access to the property before the sale has completed. However, in order to protect P s interests, the deputy should insure that a deposit has been paid and that any repairs that are carried out by the purchaser in advance of completion are done so at the purchaser s expense and risk. The transfer 37. It is the responsibility of the seller s solicitor to ensure that the transfer is properly drawn up. The transfer is made by P, not the Deputy, as only P has authority to pass the legal estate. 38. The seller is described in the transfer as [P] acting by [name of Deputy] pursuant to an Order made by the Court of Protection dated 39. Any express covenants contained in the transfer should be given by [P] by the [name of Deputy] acting as aforesaid. 6

7 40. To execute the transfer, the Deputy must sign the transfer in the presence of an independent witness, first with P s own name then with her own name. Sale by Public Auction 41. It is acceptable for the Deputy to sell the property by public auction if this is the most expedient way of selling the property and more conventional means have been unsuccessful. The Deputy remains responsible for obtaining the best possible price, and must set the reserve price before the auction takes place. 42. The seller s solicitor will be responsible for drawing up the particulars of condition and sale. The special condition in this case should read: Copes of the said Order will be supplied to the buyer s solicitors on completion and shall be deemed to be conclusive evidence of the seller s authority to sell. Sale where P is a co- owner 43. If P holds the property either solely or jointly as a trustee, and the sale is not to a co- owner, then P must be replaced or discharged as a trustee before the legal estate can be dealt with under the trust of land. 44. In these circumstances, the Deputy must make an application under s36(9) Trustee Act 1925 for leave to appoint a new trustee of land. The new trustee cannot be the co- owner or an attorney of the co- owner under an EPA. Sale to Co- owner 45. In principle, sale to a co- owner should be no different to any other sale of P s property. However, conflicts of interest often arise where the sale is to a co- owner, for example where the co- owners are P s parents. In such a case, an application will have to be made to the 7

8 Court of Protection for the Deputy to release to a joint tenant or assign to a tenant in common the beneficial interest in the property. 46. At all times, the Deputy must protect the best interests of P and obtain the best possible price for P s beneficial interest in the property. Purchase of Property by P Contract to purchase prior to application 47. Where P has entered into a contract in good faith for the purchase of a property prior to a Deputy being appointed, the court is likely to direct the newly- appointed Deputy to complete the purchase, pursuant to s18(1)(f) of the Act, so as to avoid P being liable for breach of contract. Extent of a Deputy s Authority 48. A Deputy s authority may extend to the acquisition of property in P s name or on P s behalf, pursuant to s18(1)(c ) of the Act. Depending on the grant of authority, the Deputy may or may not need to make a specific application to court for permission to purchase property on P s behalf. If she does need to make an application, she will need to do so under the full format of Part 9 of the rules, since Practice Direction 9D does not provide for a shortened application for the purchase of property. 49. As with the sale of property, the Deputy is responsible for looking after P s best interests, which in this case will consist of purchasing at the property at an appropriate price. Whether to Purchase Property for P: a Deputy s Considerations 8

9 50. What is the purpose of the house purchase? If P is to live there, how will this property be more suitable for P than his existing property, particularly if that has been his home for many years. 51. Is this in fact an issue of P s welfare rather than P s financial status? For example, is the crucial issue where would P live most comfortably? Is there disagreement between family members over this? 52. How accessible is the new property to P s family and carers? 53. Who if anyone else will live at the property with P? If a relative or carer, will that person contribute to the purchase price and maintenance of the property, or will that person be dependent on P s resources? 54. Have the appropriate medical and health professionals been consulted on the move and its likely impact on P s physical and social wellbeing. 55. How will the property be paid for? Will the cost, including legal fees, be covered by the sale of another property, or will other funds need to be released to cover the cost? If funds need to be released from court, has the appropriate authority been obtained? 56. How will the use of P s capital affect his income? 57. Will P be able to afford the upkeep of the new property, including insurance, maintenance, and bills? Will there be a mortgage? 58. Has P s actual or potential nursing care been factored into the financial equation? 59. Will works of renovation or adaptation be required and if so, what will they cost? 60. Has a full surveyor s report been undertaken on the property? Is P paying a fair market value for the property? 9

10 61. If the property is a flat, are the service charges reasonable and are there any major expenses expected? How onerous are the covenants? Are there any restrictions on the use of the flat which may affect its value? 62. Are there any matters affecting title which need to be taken into account? Contract for Purchase 63. The buyer s solicitor (ie P s) must ensure that the contract and transfer document are drawn up correctly. 64. The contract is entered into by the buyer acting by the Deputy (or other authorised person) pursuant to an order of the Court of Protection dated. As with the sale of P s property, no reference should be made to P s lack of capacity or his address. 65. P s solicitor must register the property in P s name so that the property remains vested in P. Purchase of a Beneficial Interest in Property 66. Property in which P has a beneficial interest will be purchased by at least two trustees to hold on behalf of P. One trustee will usually be the Deputy or co- owner and the other trustee is likely to be the solicitor in the matter. 67. P s beneficial interest will be protected by a restriction on the register. NAOMI CANDLIN 10