Advisers and providers of both types of plans are regulated by the Financial Conduct Authority (FCA). Additionally, the Equity Release Council – as the trade body, representing over 350 members of equity release professionals, works to raise high standards and ensure that customers receive the best possible advice and service. Members have voluntarily signed up to additional rules of principle, as testament to their commitment to this ethos.
Giving advice on equity release products (lifetime mortgages or home reversions) is a “regulated activity” - which means that those who give such advice must be authorised and regulated by the Financial Conduct Authority (FCA) and abide by its rules. The FCA requires all equity release advisers to have an appropriate professional qualification and it sets out a list of approved qualifications in the “Training & Competence” chapter of its Handbook of rules. You can find the full list of approved qualification here but the main ones to look out for are:
- CeRER (Certificate in Regulated Equity Release) – awarded by the Institute of Financial Services (IFS) (relevant webpage is here).
- CER (Certificate in Equity Release) – awarded by the Chartered Insurance Institute (CII) (relevant webpage is here).
- ERMAPC (Equity Release Mortgage Advice & Practice Certificate) – awarded by the Chartered Institute of Bankers in Scotland. The ERMAPC was discontinued a few years ago but may still be held by some advisers. The CIOBS’s general qualification for mortgages is its Mortgage Advice & Practice Certificate (relevant webpage is here).
A Lasting Power of Attorney (LPA) is a legal document enabling you to appoint one or more people to assist you in making decisions or to make decisions on your behalf. LPAs were introduced in October 2007 and replaced Enduring Powers of Attorney (EPA). EPAs made prior to October 2007 remain valid, however the content here relates to LPAs only. The information which follows derives from government websites and concerns England and Wales only.
There are two types of LPA:
(1). Health and welfare LPA: gives an attorney power to make decisions relating to matters such as; your daily routine (e.g washing, dressing, eating); medical care; moving into care and life-sustaining treatment. A health and welfare LPA can only be used when you are unable to make decisions for yourself.
(2). Property and financial affairs LPA: gives an attorney power to make decisions relating to money and property including matters such as; managing a bank or building society account; paying bills; collecting benefits or a pension and selling your home.
Giving someone else this authority may be very important because you could at some point in the future find yourself in a position where you are unable to make decisions and run your affairs. This could happen if, for example, you were injured in an accident or suffered physical or mental illness. The Office of the Public Guardian (OPG) can help you in deciding whether an LPA is appropriate for you. The OPG is in place to protect people in England and Wales who may not have mental capacity to make their own decisions relating to their health and finance. Contact details are available via the following website https://www.gov.uk/power-of-attorney/overview
An LPA must be registered with the Office of the Public Guardian (OPG) before it can be used. It is possible to end an LPA even if it has been registered provided you still have mental capacity at the time.
Attorneys appointed under an LPA must act in the best interests of the individual. This is particularly important as an attorney may be dealing with financial matters including spending money and/or making decisions about your property and assets.
Please note this is a short overview of Lasting Powers of Attorney in England Wales. There are a number of information sources available via the internet and you may also decide to seek legal advice. Processes in Scotland and Northern Ireland are different and information can be obtained via the following hyperlinks http://www.publicguardian-scotland.gov.uk/power-of-attorney and http://www.nidirect.gov.uk/managing-your-affairs-and-enduring-power-of-attorney.
Currently, if you are aged over 65 and are in receipt of Pension Credit, your entitlement is assessed at the start of an Assessed Income Period (AIP) which may run for a period of up to 5 years. During your AIP, you do not need to report any changes in income, savings or pensions which might impact on your entitlement to receive Pension Credit. If you are aged over 75, your AIP will remain in place until your household circumstances change, for example, if you move into a care home.
The Pensions Act 2014 introduced changes to abolish AIPs from April 2016. This means that, after your current AIP finishes, you will need to report changes to income or capital as soon as they take place. If you take out an equity release plan, this could affect your entitlement to Pension Credit, unless equity release is taken out for an approved purpose such as essential home repairs.
The exact circumstances in which it would be considered acceptable to take equity release without impacting your entitlement to benefits, would ultimately be a matter for the Department for Work & Pensions (DWP) to decide.
AIPS after 2016 – in a Nutshell
- From 6 April 2016, no new AIPs will be set.
- If you already have an AIP that is due to end between 6 April 2016 and 31 March 2019, it will end – either on the original date on your Pension Credit Award letter, or earlier if your household circumstances change.
- If you already have an AIP that is due to end on or after 1 April 2019, it will end early and will not be renewed.
- If you currently receive Pension Credit, the DWP will write to you telling you the new end date 6 months in advance. You can also find the new end date on the DWP website.
The Council is keen to ensure that if you are proposing to enter into an equity release plan, you fully understand that this may have an impact on any Pension Credit to which you are entitled and that you avoid taking a decision which may result in your losing out financially. All equity release plans are sold with full financial advice, and your adviser will take this issue into account. The Council also requires your equity release provider to make sure that you receive independent legal advice on the implications and potential consequences of taking out an equity release plan, to help you make a fully informed decision.
You need to appoint your own solicitor to represent your interests, once a financial adviser has recommended a suitable equity release plan to you. A solicitor is required to ensure you receive completely independent legal advice about the risks, rewards and obligations attaching to an equity release plan. They will also carry out the conveyancing required to ensure that your new equity release lender is able to secure a first legal charge against your property and that any existing secured borrowing has been (or will be) repaid. Your solicitor will not be able to tell you whether or not a particular product is suitable for you, as this is the role of your financial adviser. If you do not have a solicitor, you can click here to find one who is used to dealing with equity release cases.
Once you have made your choice, your solicitor will send you an engagement letter and terms of business. This letter will give you all the information you need about how much the legal process will cost, so that there are no nasty surprises at the end. The costs that you are quoted will assume that your case is standard and straightforward, unless you have already advised your solicitor that they will need to carry out additional work for you. Your solicitor will also give you an overview of what they will do for you in return for the fee and an estimate of how long they think it will take.
If the deeds are in joint names, you are unable to apply for equity release without a deputyship order, unless there is another attorney on the POA who is not named on the title deeds. It is HM Land Registry rules.
Your solicitor will usually want to check your title deeds at the outset. They can tell you if your deeds are registered at the Land Registry or unregistered. If your deeds are registered, your solicitor can download them from the Land Registry’s online portal, which usually costs between £3 and £6 for a freehold property. If your deeds are not yet registered, your solicitor will need to obtain them. If you already have a mortgage, your current lender will be holding any unregistered title deeds so please let your solicitor know your mortgage account number. Your solicitor can then obtain your deeds directly. If you are holding the deeds at home, we recommend that you send them to your solicitor by Royal Mail Special Delivery (or deliver them by hand) so that they are not lost. If your deeds are not registered and cannot be located, your solicitor will need to do extra work to reconstruct the title to your property and will charge you an extra fee to do this. This should be agreed with you before the work is carried out, so please always ask for a quote.
Your solicitor will usually want to check your title deeds at the outset. They may already hold your deeds. If you already have a mortgage, your current lender may be holding the title deeds so please let your solicitor know your mortgage account number. Your solicitor can then obtain your deeds directly. If you are holding the deeds at home, we recommend that you send them to your solicitor by Royal Mail Special Delivery (or deliver them by hand) so that they are not lost. If your deeds cannot be located your solicitor will be able to obtain copies and will charge you an extra fee to do this. This should be agreed with you before the work is carried out, so please always ask for a quote.
Your property needs to be held in the name(s) of the person/people who are applying for the equity release loan. If there are two of you, but only one of you is the legal owner of the property, it will usually be necessary to transfer the deeds into joint names. Your solicitor should be able to do this for you at the same time as the standard work on the equity release, but will charge you a higher fee. You should ask for a quote in this respect before you ask your solicitor to proceed with the drafting of the transfer. Some solicitors are not prepared to deal with the drafting of the Transfer deed alongside the equity release and, if this is the case, you will need a third party solicitor to quote separately for this work.
Your property needs to be held in the name of the person applying for the equity release loan. If your spouse has died, the way that your solicitor will deal with this will depend on the way in which you owned the property together. In English law, there are two ways of owning property with somebody else: joint tenants or tenants in common. Your solicitor will be able to check your title deeds and advise you which applies to you. If you were joint tenants, your solicitor will simply need to take a certified copy of the original Death Certificate of your spouse to take the name of the deceased person off the title deeds. If you were tenants in common, this means that a trust has been created and will need to be wound up. The complexity of this will depend on whether your spouse left a Will, whether you have obtained a Grant of Probate and who the beneficiaries are. Your solicitor will be able to look at all of this for you and to advise you what needs to happen next. You should prepare for additional costs if a trust needs to be wound up, especially if the deceased person did not have a Will, so always ask for a quote at the outset. It is possible that your solicitor may ask you to appoint a third party solicitor to deal with this aspect as they may not be expert in this particular area of law. Often, it makes sense to return to whichever solicitor you used to draw up your Will (if applicable) for this part of the work, as they will be familiar with your family arrangements. Otherwise, ask your solicitor for a recommendation.
Your property needs to be held in the name of the person applying for the equity release loan. If your spouse has died, the way that your solicitor will deal with this will depend on the way in which you owned the property together. Your solicitor will be able to check your title deeds and advise you. In some cases you may be asked to provide an Extract Copy of the Death Certificate. In other instances, additional legal work will be required and this could be complex depending on whether the deceased had a Will. You should prepare for additional costs especially if the deceased person did not have a Will, so always ask for a quote at the outset. It is possible that your solicitor may ask you to appoint a third-party solicitor to deal with this aspect as they may not be expert in this particular area of law. Often, it makes sense to return to whichever solicitor you used to draw up your Will (if applicable) for this part of the work, as they will be familiar with your family arrangements. Otherwise, ask your solicitor for a recommendation.
Your Attorney can only act for you if you have lost mental capacity and are unable to deal with the application and paperwork in your own right. This is primarily to protect your interests and to avoid fraudulent applications. If there is any doubt about whether or not you can deal with the paperwork personally, your solicitor will insist on a mental capacity assessment. This can be via your GP, social services or a private report can be obtained. There may well be additional fees to pay (and this will always be the case if you instruct a private assessment).
Yes you can have Equity Release on leasehold property. Providers will all have slightly different criteria on what is or is not acceptable in terms of the remaining length, or ‘term’ of the lease. The provider/lender will want to know that it can sell the property at the end of your equity release term, so they might want an unexpired term of at least 75 or 80 years, plus confirmation from a surveyor that the property is in good condition and would sell easily if necessary. Check with your provider, or ask your adviser to make enquiries before you go ahead, so you understand their criteria.
If the lease is too short for a provider/lender, you may have a couple of options available to you. For example, you may be able to buy the Freehold, or a share of the Freehold with other flat owners, or you may be able to extend the term of the lease. These options carry a cost, so make sure you investigate these thoroughly with your Landlord or the Managing Agent. You can find out more from the Leasehold Advisory Service.