Incapacity was our first topic of discussion in our podcast series. In this episode we discuss assessing a client’s capacity status, how to proceed with a power of attorney, documentation needed, and solicitor’s and attorney’s requirements. We also cover tricky topics that are not so clear cut, such as appropriacy of Equity Release, and when a client has capacity but is seeking extra help.

Assessing Your Client’s Status

If your client has a power of attorney in place, we cannot use the power of attorney document for convenience. So we would only proceed under a power of attorney if the client has lost mental or physical capacity.

This information can be gained by looking at the document you have (if you have seen a copy of it). If the power of attorney document is an enduring power of attorney, sometimes called an EPA, the donor (who is the client) has lost capacity at the time that the power is registered. In this case, we would proceed with the EPA without any further evidence regarding capacity. If the power of attorney document is a lasting power of attorney (LPA) then we will need a letter from the GP or consultant confirming that the client does not have sufficient capacity to enter into the transaction. Essentially, this isn’t a capacity assessment but rather a comment by the medical practitioner based on their current knowledge of the patient, diagnosis or treatment from their files.

When are Capacity Assessments Required?

We would use a capacity assessment if we are in doubt as to whether the client has actually lost the capacity. These cases include if there are differing medical opinions, an unclear prognosis, lack of information from the doctor confirming whether the client has lost capacity, or if there are any other reasons to query the use of the power of attorney is appropriate or necessary.

My Client Doesn’t have Capacity – How do I Proceed?

Firstly, we always have to proceed on the basis that the capacity is presumed unless we have other reason to suggest otherwise. If you think your client doesn’t have the capacity, we will immediately need to check the power of attorney document and verify it to make sure there will be no issues moving forward. At this point, a copy of the LPA or EPA will suffice. This needs to be made clear that we are using the power of attorney to avoid communication with the client. We will also need the attorney contact details in order to contact them instead of the client.

Will the Original Power of Attorney be Needed in the Process?

Yes, we have to give a legally binding promise to the lender’s solicitors that we hold the document at the time we complete the Equity Release. This is because the land registry can raise requisitions requesting to see the original documents, so we will need to be holding the original before we set completion. However, we can proceed in the first instance on a copy.

At the end of the process, the original power of attorney will be sent back to the attorneys. As soon as we receive it, a certified copy will be taken and we can provide this copy to the client if they need it whilst the transaction is progressing. When the Equity Release mortgage has been registered on the property on the property title, we will then return the original power of attorney document to the client and the attorney.

Solicitor’s Requirements

The lender’s solicitor will likely have additional requirements with a power of attorney case.

We need to look at the use of funds being released under the cover of the Equity Release. The use of funds will need to be for the welfare and benefit of the client, or for the care of the client. Therefore different lenders have different criteria, but generally, we need to ensure that the use of funds is to benefit the client or for the care of the client.

Attorney Reimbursement

If the attorney has used their own money to pay for care costs, they allowed to reimburse themselves from Equity Release proceeds due to the fact the funds are there to cover the care of the client, even if that care has already been paid for. To satisfy ourselves of that, we would need to see evidence of the initial spend by the attorney on the care costs. Ultimately, when we are looking at the use of funds, it’s really useful to warn the attorney that we will be requesting evidence to verify that use of funds.

Unclear Use of Funds

In some cases, funds will be requested that are not cleared for welfare and benefits. This will depend on the individual case. We have had some cases where we have been able to obtain consent from the lender in writing to the use of that money, even if it isn’t clearly or obviously for welfare benefit or care.

For example, we had instruction from a client whose wife had lost capacity. It was a joint application and we had an attorney acting for the wife who had lost capacity. They wanted to use the Equity Release money to buy a caravan so that they could spend some time by the sea together. That was questionable as to whether it was for her welfare and benefits, but the lender provided a consent to use the funds for that purpose and we proceeded on the basis of that consent.

Signing Appointments

For any Equity Release case, there will be a signing appointment. However, in the case where the client has lost capacity, there will be some differences. If a client has lost mental capacity, the attorney will sign the documents in their place and they will need to have their identity verified. If the client has lost physical capacity, both the attorney and the client will need to engage with the solicitor at the signing appointment and confirm that they understand the mortgage. The attorney will need to be identified and actually sign the documents. In both instances, the client will still need to evidence their identity even though they don’t have the capacity.

Time Frames

A power of attorney application won’t necessarily take longer and we complete a large number of these cases regularly. There shouldn’t be any problems so long as we can satisfy all of the requirements and deal with them on a timely basis. It is therefore really helpful for us in progressing the case quickly if the attorney is prepared and well advised with what information they will need to provide to us.

Other Considerations

In cases of incapacity, the court of protection can still grant orders or deputyships. The requirements are largely similar, however, note that any order from the court of protection will need to specifically confirm that the power can be used for an Equity Release. Usually, there is a separate order confirming this.

In a situation where a client does have capacity but simply needs help with the paperwork, we cannot use a power of attorney. As mentioned earlier, we don’t use a power of attorney for convenience; it can only be used where a client has lost capacity. However, we understand that some of our clients need help with paperwork and it can be a lot for them to deal with. In those circumstances, we are happy to liaise with a family member as a third party, so long as our client has signed our written authorisation form. The key issue to consider here is our code of practice, which requires us to observe our clients confidentiality. Therefore we need to express written permission to liaise with a third party. Note as well that we can actually ask the client to provide information on how much they want the third party to be involved, so the client has the power to limit that if they only want help in certain stages of the case.

Key Points

• We will need the original power of attorney before completion.
• Secondly, funds can only be used for the care and welfare of the incapacitated individual.
• Thirdly, that we will need proof of incapacity, more than likely a letter from a medical practitioner.
• Lastly, and probably more importantly, a well-prepared attorney shouldn’t lead to any delays in terms of timeframes.