RWK Goodman: Residents' Contracts - Balancing Compliance and Commerciality

It has been nearly seven years since the Competition and Markets Authority (CMA) undertook an investigation into care home contracts in the elderly sector. This resulted in the issue of a substantial 139-page guidance document, several high-profile investigations and court action involving some national names. Following an unsuccessful case against Care UK in 2021, the guidance was edited and re-issued and the CMA has, for now, gone very quiet on the topic. It has never been clear whether the guidance is statutory (binding) or not. A link to the guidance is here.

RWK Goodman Partner, Hazel Phillips, wrote a summary of the guidance which can be found here.

What is the current advice on residents' contracts for UK care home providers?

There has been no change to consumer legislation which underpins how operators can contract with residents. The relevant law is contained in The Consumer Protection from Unfair Trading Regulations 2008 and The Consumer Rights Act 2015. Cancellation of contracts signed remotely is covered by The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, and yes, oddly, this can apply to residents contracts. In summary operators are required to:

• ensure that statements made in marketing, admissions procedures and contracts (both in writing and verbally) are true, complete and accurate;
• give prospective residents and their families the information they need to make informed decisions;
• provide fair contract terms, ensuring that key terms are highlighted so residents can understand all the essential features before entering into the contract;
• offer a 14 day cancellation period for contracts signed away from the care home or remotely.

Whilst the CMA has not been seen in action recently, it would be foolish to disregard its guidance entirely. There are key aspects of the guidance which have been successfully enforced by the CMA, albeit on a voluntary basis. These include provisions relating to the charging of fees on death, deposits and charging for pre-admission services. It is notable that the CMA has new powers from 6 April 2025 which allow it to directly enforce consumer law and issue fines up to 10% of an organisation’s turnover. It can also open a direct consumer enforcement investigation and apply to court for an interim enforcement order to prevent or stop consumer harm.

In our view there has always been some tension between the guidance and the commercial needs of operators. Part of the challenge is to ensure that contracts are consumer compliant but also protect the operator against cost pressures, changes in funding and unpaid debts.

It is vital that contracts contain enforceable provisions permitting operators to assess prospective resident’s finances both in advance and during the contract and clearly set out what happens when funding needs change. This is not just about the contract. This is about looking at the whole admissions process, engaging at the earliest point with prospective residents to understand their circumstances, how and who is paying the fees and how long that arrangement will last. The contract needs to include the right protections for both parties but real value can be added in training admissions staff on the importance of discussing the key terms of the contract with residents and their families ahead of time, with particular emphasis on long-term funding and finances.

RWK Goodman provides advice on admissions processes and residents contracts. Please do get in touch with Hazel Phillips if you would like an initial free review of your contract.

DCHC is also working with RWK Goodman to produce a residents' contract for all members. We will be holding an RMN Session with RWK’s Hazel Phillips on 23rd September. Further details can be found on our Events page.

About RWK Goodman Health & Social Care Team

The Health & Social Care team at RWK Goodman is a recognised market leader, with in-depth knowledge and experience in the social care sector. Based across London, Thames Valley and the South West, our team of lawyers are fully immersed in social care, which enables us to cut to the heart of urgent matters quickly, and help you plan for what may lie ahead.

Our aim is to get to know your business and become the strategic advisors you trust to provide insightful, pragmatic solutions. Our clients include nursing and residential homes, hospices, homecare agencies, supported living, specialist colleges and children’s services and our advice covers many areas.