land charges on house (by council), and conveyancer paying council interest they have demanded

ewainwright

My father died in January, two years after my mother; for the last two years of his life (after my mother died) he was in a care home.

In dealing with the estate there was charges placed against his house for approx 58,500 in 2011 by the local council for work done. the record on the land registry says 0% interest.

There are changes of 83,000 to be paid to the council for the cost of the care home.

I was expecting the conveyancer to pay the council the 58K for the land charges, and the residual amount left after costs etc would be used to pay the 83K owed for the care home.

The conveyancer is paying the council approx 101K because they say in 2011 they sent my parents a letter with this 

"At the time it was agreed that the Authority would recover the money through a charge on the property rather than pursue you for the money directly. However the Council now needs to protect its interest by formally registering this debt with the Land Registry and Schedule 3 of the above Act requires the Authority to first make a ‘demand for expenses’ before this can be done.

 Consequently I now enclose an invoice for the full amount for your information. I am aware that you do not have the necessary funds available to settle this account and the Authority does not expect you to pay this sum now. I can also confirm that I have already put suitable mechanisms in place to prevent the normal debt recovery processes for invoices applying in this instance.

 However, I must notify you that this charge will attract interest at a rate equivalent to 4.87% per annum. This is the rate that the Authority has deemed reasonable and will apply from the date of this letter until the payment of all sums due under this demand.

 Please note that you have a right of appeal against this demand to a residential property tribunal. All appeals must be made within the period of 21 days beginning with the date of service. The details of the local office can be found below."

consequently they have charged compound interest of 4.87% per annum making the total owed now over 100K.

Is this legal?

In doing probate I registered the death with the Gazette and paid for inclusion in their local paper; I had been in contact with the council regarding the car home fees due and also regarding the occupancy state of the house. At no point did they ever mention this accumulated debt.

My father died with approx 25K in the bank (due to not spending any pension for over 2 years in the care home) leaving approx 20K after costs. The sale price of the house (after taking into account the estate agent charges and conveyancer fees) only just covered the amount owed to the council and now it isn't enough to cover the debts since they have added the interest charge.

Also can the conveyancer pay the c

Keep_pedalling

I can’t comment on the legality of the interest charges, but if it correct then effectively your father’s estate is insolvent and you need to be very careful in how you handle this, especially if their are any other creditors.

What has the conveyancing solicitor said about the apparent conflict in the 0% interest stated on the LR and the interest the LA are quoting? 

poppystar

How shocking- you would have thought that the original letter would have required some reply from your parents showing they accept the new terms - otherwise how can anyone know they received the letter and were aware of the change in the arrangement? A very costly lost letter if it didn’t arrive. I wonder how many other people have this surprise lying in wait for them. 

ewainwright

The conveying solicitor is just forwarding the question to them. 

The only creditors are the local council.

The letter was after the works had been done and states 

"At the time it was agreed that the Authority would recover the money through a charge on the property rather than pursue you for the money directly. However the Council now needs to protect its interest by formally registering this debt..."

i would think that any contract would have been what was agreed, and the council has then decided to unilaterally change the terms of the contract by imposing interest charges

 

Dave_5150

I am surprised the council didn't update the Land Registry charge during the 12 years since they decided to charge interest.

ewainwright

but how can an interest charge be valid if as they say 

"At the time it was agreed that the Authority would recover the money through a charge on the property rather than pursue you for the money directly. However the Council now needs to protect its interest by formally registering this debt with the Land Registry and Schedule 3 of the above Act requires the Authority to first make a ‘demand for expenses’ before this can be done."

so isn't it this case 

in 2007 we agreed to do work on the house and recover the money at a later date by registering a charge on the property (which will be collected when the property is subsequently sold)

now we've changed our minds and want the money now and because we have sent you a letter asking for it we are going to charge you interest for this date forward.

how can the council unilaterally decide to change a contract to make it more advantageous to them?

If this is legal, what is to stop shops who do the buy now pay in 12 months time saying to a customer after a month, we've decided we'd like the money now but we will wait for the 12 months as originally agreed but will charge you 30% interest between now and them 

Keep_pedalling

ewainwright said:

but how can an interest charge be valid if as they say 

"At the time it was agreed that the Authority would recover the money through a charge on the property rather than pursue you for the money directly. However the Council now needs to protect its interest by formally registering this debt with the Land Registry and Schedule 3 of the above Act requires the Authority to first make a ‘demand for expenses’ before this can be done."

so isn't it this case 

in 2007 we agreed to do work on the house and recover the money at a later date by registering a charge on the property (which will be collected when the property is subsequently sold)

now we've changed our minds and want the money now and because we have sent you a letter asking for it we are going to charge you interest for this date forward.

how can the council unilaterally decide to change a contract to make it more advantageous to them?

If this is legal, what is to stop shops who do the buy now pay in 12 months time saying to a customer after a month, we've decided we'd like the money now but we will wait for the 12 months as originally agreed but will charge you 30% interest between now and them 

Shops fall under consumer rights laws, but an indefinite debt to a LA does not. From their point of view not being able to claim the debts for decades means in real terms the amount they get back will be far less due to inflation.

How did the dept come about? Was it because it is leasehold and the LA as free holders needed to carry out repairs or was this a LA funded improvement loan?

One other thought that occurs to me is the amount owned for residential care because full self funding would have ended earlier if the amount owed in interest was taken into account, so I think you need to look at getting that adjusted accordingly?

ewainwright

The dept was from LA funded repairs, but the terms had been apparently agreed in 2007 it was 4 years later in 2011 they decided that they wished to charge interest on the amount owed.