The Residential Care Loan Scheme Policy

Background

What is a residential care loan?

5. It is a loan agreement between the Crown and a borrower ("client") under which the Crown advances funds to the client, which are paid to the appropriate provider on the client’s behalf, on account of the client’s liability under Part 4 of the Act to pay for any contracted care services received by the client.

6. Generally, a loan is secured over the client’s former home, with the Crown’s interest being protected by a caveat lodged against the title to that home.

7. The loan balance is generally due to be repaid when the client dies or the former home is sold or otherwise disposed of (or in the case of licence to occupy, it is terminated), whichever happens first, or at any earlier time set out in the loan agreement.

Roles and responsibilities

8. The Ministry of Health is responsible for the loan scheme policy, funding contracted care services under the loan scheme, and issuing loan statements to clients. The Ministry of Social Development administers the loan scheme as an agent of the Ministry of Health under a Power of Attorney, and provides certain legal and administrative services in relation to the loan scheme. All references to the Ministry of Social Development in this notice are as agent for the Ministry of Health.

Purpose of the loan scheme

9. The purpose of the loan scheme is to assist older people who, because they own their former homes, have assets above the applicable asset threshold and are obliged to pay for the cost of contracted care services provided to them, and have limited other assets. The loan scheme recognises that for many older people their former homes are their principal assets, which they may wish to retain when they enter residential care for a time that allows them to adjust to their changed circumstances.

10. For the avoidance of doubt, the loan scheme does not operate in respect of any agreement between the client and the provider for any services that are not contracted care services, and payment for any such services remains a personal liability of the client.

Offer of loan discretionary

11. The Ministry of Social Development considers each application for a loan on a case-by-case basis. There is no obligation on the Ministry of Social Development or the Ministry of Health to offer a loan.

12. The Ministry of Social Development may offer a loan to and enter into a loan agreement with the applicant if the Ministry of Social Development is satisfied:

(a) Key eligibility criteria

The applicant meets all of the key eligibility criteria, or meets at least paragraphs (a) to (c) of the key eligibility criteria and has exceptional circumstances as described in paragraph 4; and

(b) Purpose of scheme

The application fits within the purpose of the loan scheme; and

(c) Sufficient security

The loan can be adequately secured over the applicant’s former home; and

(d) Recovery

There are no significant risks that would affect the Crown’s ability to recover and enforce repayment of the loan or the terms of the loan agreement.

Loan terms and conditions

13. Any loan will be made on terms and conditions considered appropriate by the Ministry of Social Development. These will include:

(a) terms and conditions relating to the matters set out in paragraphs 13.1 to 13.21; and

(b) any additional conditions required in the particular circumstances; and

(c) any other conditions required to meet the exceptional circumstances of a client who does not meet all the key eligibility requirements; and

(d) a term consenting to and authorising the Ministry of Health and Ministry of Social Development to provide the other with any information that is contemplated under, or necessary to administer or enforce, the loan terms and conditions or the loan scheme policy.

13.1 The client will be required to enter into a loan agreement recording the terms and conditions of the loan. If the former home is co-owned with another person or persons, each of the other co-owners will also be required to enter into the loan agreement as borrowers for the purpose of the Crown obtaining adequate security for the loan. Generally, a caveat will be lodged against the title to the former home as notice of the loan agreement. In the case of a licence to occupy, the licensor will be required to covenant that if the licence is terminated, the amount payable or repayable to the client on termination will be held for the Crown to the extent of the amount of loan balance repayable.

13.2 A loan agreement may specify that the Crown will make advances under it:

(a) for no more than a specified period (the "period of the loan"); or

(b) not exceeding a specified monetary limit; or

(c) subject to limits under both paragraphs (a) and (b), whichever occurs first.

13.3 The client is required to maintain the former home and pay all rates (which may be by way of a postponed or deferred rates scheme), insurance, and other outgoings until the loan is repaid. The assets referred to in paragraph (e)