Deferred Payment Agreement: How the Council Pays Care Costs Until You Sell

A DPA is a legal agreement between you (or your attorney) and the council, made under the Care Act 2014 section 34 and the Care and Support (Deferred Payment) Regulations 2014. The agreement:

• Allows the council to pay your residential care home fees from the date of the agreement.
• Imposes a charge on your property (registered at the Land Registry).
• Defers your share of those care fees until the agreement ends (typically your death, sale of the property, or you stopping needing care).
• Charges interest at the prescribed rate.

The council MUST offer a DPA if you meet the eligibility criteria — councils cannot refuse just because they prefer you to sell. They can refuse if your property has a low equity (mortgages and existing charges leave less than the upper capital limit) or if you have other capital you could draw on first.

Under the regulations:

• Care need: you are receiving (or due to receive) eligible residential care, or care at home (some councils offer DPAs for care at home; mandatory only for residential).
• Property: you own (alone or jointly) a property that is being counted as capital. The property cannot be disregarded under the spouse rule, dependent relative rule, or 12-week disregard.
• Equity: after deducting mortgages, charges, and a 10% margin for fees, there must be enough equity to support the agreement. Typically £40,000+ minimum net equity.
• Other capital: less than the upper capital limit (£23,250 in 2025-26 in England) in non-property assets.
• Capacity: you (or your attorney under LPA, or deputy under court order) consent and understand the implications.
• Application: written agreement, with conveyancing/legal fees usually deducted from the deferred amount.

Councils may have local discretionary rules adding to (but not subtracting from) the mandatory framework. Some councils refuse DPAs where the family disputes the agreement; some offer them where the cared-for person prefers to rent the property out and use rental income.

The mechanics:

1. Care needs assessment and financial assessment identify that you need residential care and would pay self-funder rates unless a DPA is in place.
2. Apply to the council for a DPA. The council carries out the eligibility check.
3. Legal stage — the agreement is drafted, the property valued, the equity calculation done. A charge is registered at the Land Registry. Solicitors fees: typically £500-£1,500, often deducted from the deferred amount.
4. Council pays the home directly at its standard rate (or up to the rate agreed). You continue to contribute from your income (less the £144/week Personal Expenses Allowance for DPA-funded residents).
5. Interest accrues on the unpaid amount at the rate set by HM Treasury under the regulations.
6. Property maintained — you remain responsible for insurance, repairs, council tax (which is reduced when the property is unoccupied). Some councils take over property management; many leave it to family/attorney.
7. End of agreement — at your death, the sale of the property, or you ending residential care. Repayment due within 90 days.

The interest rate is set under the Care and Support (Deferred Payment) Regulations Schedule 1: an annual maximum equivalent to 2% above the cost of government borrowing on 15-year gilts. In practice, councils' DPA rates have ranged from 1.45% (low interest era) to 7% (2024). The rate is fixed at the start; some councils review annually.

Worked example:

• Care home cost (council rate): £900/week (£46,800/year).
• Your contribution from income: £180/week (State Pension etc.).
• DPA covers: £720/week = £37,440/year.
• Year 5 deferred amount (with 5% compounding interest): around £207,000.
• Property value: £350,000.
• Equity remaining for estate after sale: around £125,000 less legal fees.

Compared to: forced sale at year 1, paying full self-funder rate from cash, then qualifying for council funding only at the lower threshold. Either route consumes the home value substantially. The DPA gives flexibility about timing and preserves the option of family use of the property in some cases.

Alternatives families consider:

• Sell the property and self-fund directly — straightforward; gives full control of timing and price; loses the home protection.
• Rent the property out and use rental income — combined with the means-test, often produces partial council funding plus rental income covering part of fees.
• Equity release / lifetime mortgage — borrowed money pays care fees; loan plus compound interest deducted from estate. Often more expensive than DPA; useful where the council refuses DPA or for care-at-home cases.
• Family loan agreement — family members lend money to pay fees; agreement registered against property. Tax implications (deprivation of assets risks if poorly structured).
• Sale and leaseback — sell to a relative who rents the home to you. Tax and inheritance implications; specialist advice essential.

For most homeowners with significant equity and a clear preference to keep the home in the family during care, a DPA is the simplest and lowest-cost route. Compare options with an independent financial adviser specialising in later-life planning (SOLLA — Society of Later Life Advisers).