SOCIAL SECURITY HYPOTHECS (JERSEY) LAW 201-
Accompanying Report
The Island faces a substantial increase in both the number and proportion of older residents over the next 30 years, with care costs predicted to more than double by 2044. In response to this issue, in July 2011 the States approved the Long Term Care (Jersey) Law 2012. Details of the operation of the proposed scheme have now been set out in Proposition P.99/2013, which will be debated before this new Law is considered.
The introduction of a long-term care (LTC) scheme is designed to share long-term care costs more fairly across the community and the scheme will establish a clear and simple process to help individuals and their families understand the choices available and plan for the cost of long-term care. The proposed new scheme will provide financial support to Jersey residents who have significant long-term care needs and who are being cared for either in their own home or in a care home.
As set out in section 15 of the report accompanying P.99, an important aspect of the new LTC scheme is to acknowledge the difficult position of many elderly homeowners facing substantial care bills. The LTC scheme includes a generous disregard in respect of property and non-property assets. An individual or couple who have total assets below the asset disregard level of £419,000[1] will not need to use up their assets and will be able to apply for means tested assistance with their care costs under the new scheme.
For those who have property assets above this level, a new form of legal hypothec is being proposed. This will enable a loan to build up and be secured against the value of the family home (minus the value of the disregard). Repayment of the loan will generally be sought when the property next changes hands (although it should be noted that repayment may be required sooner, if, for example, the Department became aware that the debtor had come into a significant sum of money). Repayment resulting in a sale of property would not be sought in any circumstances where to do so would be inconsistent with a person’s rights under the European Convention on Human Rights.
This type of hypothec does not currently exist under Jersey legislation and a new law, the Social Security Hypothecs (Jersey) Law 201-, has been drafted as part of the development of the long-term-care scheme.
Background
Under the new Long-Term Care (Jersey) Law 2012, it is intended that where a household is ‘cash poor’ but ‘property rich’, the Social Security Department may make long term care payments on a person’s behalf for the time being but with such payments to be treated as a loan. This has the effect that those who are ‘cash poor’ but ‘property rich’ do not have to sell their family home to meet their care costs. The draft Social Security Hypothecs (Jersey) Law 201- will allow the Department to take adequate security in these circumstances with repayment of such sums generally being sought by the Department when the property next changes hands. An asset disregard of £419,000 will provide a separate protection to the owners of smaller properties and these homeowners will be able to apply directly for means tested assistance from the long-term-care fund.
The Income Support (Jersey) Law, 2007, (“the Income Support Law”) also provides for certain circumstances in which debts due by a claimant may be secured by a charge being taken against the claimant's property and, again, the draft Social Security Hypothecs (Jersey) Law 201- will allow the Department to take adequate security in these circumstances with repayment of such sums generally being sought by the Department when the property next changes hands.
Security against Jersey property
Under current Jersey property law, a debt can be secured against property using a hypothec. Three types of hypothec - judicial, contractual and legal - are described under the Loi (1880) sur la propriété foncière (“the 1880 Law”). However, none of these could easily be used in respect of loans under the Long-Term Care Law, where the value of the debt builds up over time. In particular:-
Judicial hypothec: Article 13 of the 1880 Law requires that, in order to take a judicial hypothec, a sum of money must be recognised as being due pursuant to a judgment of the Court, whether contingently or otherwise (“le montant …” “en cas d’une … obligation contingente,… une ou plusieurs sommes”). In relation to benefit, there is an uncertain sum of money which will fall due on a future date and this makes for difficulties in providing for a judicial hypothec to be taken.
Contractual hypothec: The creation, and passing before Court, of a contractual hypothec (hypothèque conventionelle) on each and every occasion where monies are due to the Department would be unwieldy and would depend upon the consent of the recipient.
Legal hypothec: The only provision in the 1880 Law for an automatic (i.e. legal) hypothec is –
- in Article 7 for a widow or surviving civil partner upon the death of the husband or other civil partner; and
- in Article 11 for unsecured creditors on the death of the debtor,
neither of which is relevant to the Social Security Minister.
Social Security Hypothecs (Jersey) Law
Rather than make changes to the 1880 Law, a new law has been drafted to deal specifically with security in respect of loans provided under the Long-Term Care scheme (and debts under the Income Support law). The proposed Social Security Hypothecs (Jersey) Law 201- creates a new type of legal hypothec. This has several advantages:
- The registration process is very simple. The claimant will provide details of their property ownership to the Social Security Department and will confirm that they wish to claim LTC benefit on the basis of a loan against the value of their property (minus the value of the disregard). Debts may also have accrued or may arise in due course pursuant to the Income Support Law.
- The Department will check the details and submit them to the Judicial Greffe. The hypothec will be registered in the Public Registry, and the claimant will receive a written notification from the Department that this has been completed.
- A fee of £80 will be levied on the registration.
- Once the hypothec has been registered, the value of the outstanding debt can increase as the claimant continues to receive long-term care or payments which are due to be repaid under the Income Support Law.
- The Department will not generally require the loan/debt to be repaid until the property next changes hands. In particular, if an individual is in care, and their partner remains living in the property, the loan will not be due for repayment until the partner moves out of the property or the property is sold.
- When the loan/debt is repaid, the Department will notify the Judicial Greffier who will cancel the hypothec.
The hypothec will take the date of its being registered in the Public Registry and rank in priority to other hypothecs from that date. The amount secured by the hypothec at the time of a dégrèvement (or désastre) would be the amount of the accrued indebtedness at the time of such bankruptcy proceedings.
The hypothec covers property that is owned individually or jointly by a claimant and their partner. In unusual circumstances, this could include a property owned jointly with a third party. In the event of a désastre or dégrèvement in this situation, the property would be deemed to be owned in common and only the property of the claimant or their partner would be subject to the proceedings. There is no question of the hypothec operating to deprive a third party of their assets.
The one difference from the existing legal hypothecs (under Articles 7 and 11 of the 1880 Law) is that this new form of legal hypothec will be registered in the Public Registry and notice of such registration given to the debtor. This is necessary so that, for example, anyone looking to purchase the property would be able to discover that such security was in place on the property.
Financial and manpower considerations
The development costs of the LTC scheme are being met through existing departmental budgets. The ongoing costs of the scheme will be met directly from the LTC Fund.
It is estimated that an additional 9.5 FTE will be required to administer the new LTC scheme.
Human Rights
The notes on the human rights aspects of the draft Law in the Appendix have been prepared by the Law Officers’ Department and are included for the information of States Members. They are not, and should not be taken as, legal advice.
APPENDIX
Human Rights Note on the Social Security Hypothecs (Jersey) Law 201-
Human Rights Notes on the draft Social Security Hypothecs (Jersey) Law 201-.
These Notes have been prepared in respect of the draft Social Security Hypothecs (Jersey) Law 201- (the “draft Law”) by the Law Officers’ Department. They summarise the principal human rights issues arising from the contents of the draft Law and explain why, in the Law Officers’ opinion, the draft Law is compatible with the European Convention on Human Rights (“ECHR”).
These notes are included for the information of States Members. They are not, and should not be taken as, legal advice.
Articles 2 and 3 of the draft Law, engages Article 1 of the First Protocol of the ECHR (“A1P1”) which guarantees the right to property.
A1P1 provides –
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
Immoveable property is a ‘possession’ for the purposes of A1P1 and Articles 2 and 3 of the draft Law, by creating a hypothec over such property, provide for the control of use of, and, were the hypothec to be enforced, potentially the deprivation of, such a possession. This is an interference with property which, in order to be permissible, must (i) serve a legitimate objective in the public or general interest (ii) be proportionate to realising that objective and (iii) comply with the principle of legal certainty.
The objective behind the measure can be identified as ensuring that people who have sufficient assets as to be required by Social Security to make certain payments are not required to sell their family homes in order to be able do so. This can be said to be a legitimate objective in the public interest and, indeed, is consistent with the objective of respect for private and family life (Article 8 of the ECHR). Given the importance of this objective, the fact that people have entered and will enter into such arrangements with Social Security on the understanding that security may be taken over their property and the fact that any security granted over the property prior to the law coming into force or the hypothec being registered will rank in priority to the security created by the law, the interference with the A1P1 right can be regarded as proportionate to meeting this legitimate objective. It should also be noted that, in enforcing his rights under the draft Law, the Minister will be required to act in such a way as to ensure compliance with the rights of individuals under the ECHR. Finally, the scope of the interference provided for in Articles 2 and 3, as amended by the draft Law, constitutes a clear and precise legislative statement, with no obvious room for ambiguity. Accordingly, the interference instigated by Articles 2 and 3 to which the draft Law contributes is ‘in accordance with the law’. Therefore Articles 2 and 3 of the draft Law, (i) serve a legitimate objective in the public or general interest, (ii) are proportionate, and (iii) comply with the principle of legal certainty.
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