Summary: Mr P has complained about a care provider unfairly increasing his mother’s residential care fees. However, the Ombudsman has not determined any fault in this respect. This is because the care provider increased its fees in compliance with the private care agreement. We are also unable to assess the fairness of the fee variation clause by reason of consumer law.

The complaint

1. The complainant, who I refer to as Mr P, is making a complaint on behalf of his mother (Mrs K) who is in residential care. Mr P informs that Mrs K’s care home which was operated by the Brighterkind Group (Brighterkind) was recently acquired by Barchester Healthcare Homes (Barchester). Following the acquisition, Mr P complains that Barchester increased Mrs K’s fees by 5.9% in accordance with its own terms and conditions.
2. Mr P feels the fee variation is unjustified and that Barchester cannot rely on its own terms and conditions as Mrs K’s contract is governed by a private care agreement with Brighterkind. In addition, Mr P says it is unfair, as a matter of consumer law, that Barchester’s fee increase was greater than that applied by Brighterkind to their own care homes. This is because, in Mr P’s view, both operators are subject to the same operating costs.
3. As a desired outcome, Mr P wants Barchester to cancel the fee increase or reduce it to that which would have been applied by Brighterkind had they still owned Mrs K’s care home.

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The Ombudsman’s role and powers

4. We investigate complaints about adult social care providers and decide whether their actions have caused an injustice, or could have caused injustice, to the person making the complaint. I have used the term fault to describe such actions. (Local Government Act 1974, sections 34B and 34C).
5. If an adult social care provider’s actions have caused an injustice, we may suggest a remedy. (Local Government Act 1974, section 34H(4)).
6. The Health and Social Care Act 2008 (Regulated Activities) Regulations 2014 and the Care Quality Commission (Registration) Regulations 2009 set out the fundamental standards those registered to provide care services must achieve. The Care Quality Commission (CQC) has issued guidance on how to meet the fundamental standards below which care must never fall.
7. Under the information sharing agreement between the Local Government and Social Care Ombudsman and the Care Quality Commission (CQC), we will share this decision with CQC.

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How I considered this complaint

8. I have reviewed Mr P’s complaint to the Ombudsman and Barchester, including supporting documents. I have also had regard to the responses of Barchester, applicable consumer legislation and policy guidance. Both Mr P and Barchester commented on a draft of my decision before a final view was reached.

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What I found

Background

9. The law regulating unfair contract terms is set out in the Consumer Rights Act 2015 (CRA 2015). Section 62(4) provides that a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer (referred to as the ‘fairness test’). As per Section 64, some terms are excluded from the fairness test if the assessment of the term relates to the appropriateness of the price payable under the contract. Further, the term must be prominent, transparent, expressed in plain and intelligible language and is legible. A term is prominent for the purposes of this section if it is brought to the consumer’s attention in such a way that an average consumer would be aware of the term. This is known as the ‘Core Term Exception’.
10. Balanced contracts require that care home residents receive what they have been promised, in exchange for paying an agreed price. Terms which give care providers, in effect, an unlimited right to increase the price of its service after it has been agreed are likely to be unfair under consumer law, especially where the resident has no choice but to pay the higher price or leave. As with general variation terms, transparency is critical, so that prospective residents can foresee changes and understand the practical implications for them.
11. In 2018, the Competition and Markets Authority (CMA) completed and published its market investigation into residential care homes (available here). In summary, the report outlines that fee variations should be agreed contractually, in advance and prior to a resident accepting an offer of a place. The term should specify the circumstances in which a fee increase will arise and the method of calculation. Best practice is to consider fee variations by reference to a relevant, objective and verifiable published price index. Further, the term must be transparent, unambiguous and not allow the care provider to arbitrarily increase their costs in a way that the consumer could not have reasonably foreseen.
12. The private residential care agreement between Brighterkind Group and Mrs K provides at clause eight that Brighterkind shall be entitled to increase residential fees annually in the light of increases in our costs arising from inflation running costs and/or the provision of extra care. Mrs K does not have a contract with Barchester following its acquisition of Bighterkind.

Chronology of events

13. In March 2019, Mrs K entered into a private agreement for the provision of residential care with Brighterkind.
14. In November 2019, Brighterkind was acquired by Barchester which as standard, increases its fees by 5.9% annually in light of increased market costs.
15. In March 2020, Barchester wrote to Mr P informing that it was increasing its care fees by 5.9%, to be implemented from 1 April 2020. Mr P later wrote to Barchester disputing the fee variation and informed that Barchester was unable to rely on its own terms and conditions. This is because in Mr P’s view, Mrs K was only bound by the terms and conditions of Brighterkind’s care agreement.
16. In June 2020, Barchester provided a final response to Mr P outlining the factors which had led to the decision to increase fees, including, but not limited to, cost inflations and increases in the National Living Wage. It set out that it was increasing its fees in accordance with the care agreement between Mrs K and Brighterkind. This provides that Brighterkind may increase fees on an annual basis in light of:

a) increased costs incurred by Brighterkind as a result of inflation;

b) increase in Brighterkind’s running costs; and/or

c) the provision of extra care to the individual.

17. In July 2020, Mr P brought him complaint to the Ombudsman as he was dissatisfied with the responses from Barchester.

My findings

Assignment of Mrs K’s care agreement

18. Assignment is the legal term for transferring rights under a contract and the general rule is that contracts are freely assignable unless the contract itself expressly prohibits this (without the consent of the parties for example). When Barchester acquired Brighterkind, Brighterkind assigned its contractual legal rights to Barchester, meaning Barchester assumed a legal interest to enforce the rights under the agreement (such as to receive payment or increase fees). I note from Mr P’s written correspondence that he believes Barchester is seeking to enforce its own fee variation terms under its own contract. However, it is my view this is strictly not the case and that such a process could only be achieved through the legal concept of ‘novation’ which involves the original contract between Brighterkind and Mrs K being exhausted and a new contract being established with the consent of the parties.
19. In my view, Barchester is seeking to increase Mrs K’s care fees by 5.9% in accordance with the care agreement between Brighterkind and Mrs K (see paragraph 16). I believe this was sufficiently addressed by Barchester when it wrote to Mr P giving notification of the fee variation against Brighterkind’s care agreement. That said, I recognise this is the specific general fee variation under Barchester’s own private care agreement. However, the fee variation under the terms of Brighterkind’s care agreement does not set a limit by which fees can be increased and allow for increased fees in line with inflation and running costs generally. On this basis and insofar as Mr P’s complaint relates to Barchester relying on its own terms and conditions for which Mrs K is no party, I cannot determine any fault. This is because Barchester is relying on its assigned legal interests under Brighterkind’s care agreement.
20. I recognise Mr P feels Mrs K has been placed at a detriment by reason of Barchester’s acquisition of Brighterkind. Specifically, Mr P references that consumers should not be placed at a detriment for reason of a transfer of rights and obligations resulting from a business sale. However, it is my view that Mrs K’s rights remain unaffected. This is because her care is still governed by the private care agreement with Brighterkind and there has been no variation to the terms and conditions within that care agreement.

Unfair contract terms

21. Notwithstanding the above assessment regarding the assignability of contracts, for a term to be legally enforceable it must be fair. However, in order to assess a term for fairness in accordance with Section 62(4) of the CRA 2015, the term must not fall within the scope of the Core Term Exception.
22. It would appear to be uncontroversial that the clause in the private care agreement (see paragraph 16) is one that relates to the appropriateness of the price payable under the contract. It is therefore within the scope of the Core Term Exception provision in section 64 of the CRA 2015. To determine whether the price variation term meets the criteria of the Core Term Exception, consideration needs to be given as to whether the term is both transparent and prominent. On review of the private care agreement, the term is clear as to the circumstances in which fees may be increased, namely in accordance with: (i) inflation; (ii) day-to-day running costs of the care home; and/or (iii) additional care being provided.
23. In addition, the term is in plain language, contained within the main body of the contract, and is in large font for users to read. For these reasons, I consider that the term is covered by the Core Term Exception. For that reason, the term cannot be assessed for substantive fairness and I cannot determine any fault on the part of Brighterkind or Barchester in this regard.

Barchester’s running costs

24. The fee variation clause allows for fees to be increased in limited circumstances, including, but not limited to, increased running costs. Further, Barchester informed Mr P its decision to increase fees by 5.9% was due to cost inflations and an increase in labour costs. Therefore, to determine whether Barchester has increased its costs in compliance with the fee variation clause, I requested a full breakdown of its running costs for the years 2018/19 and 2019/20. On review of the breakdown, I found that Barchester’s running costs increased beyond 5.9% which is the amount Mrs K’s fees were increased by. Importantly, this information is commercially sensitive and therefore in the interests of maintaining fairness to Barchester, I do not propose to publish what the overall increments were. However, the information provided by Barchester clearly demonstrates it increased its costs in compliance with Brighterkind’s fee variation clause. On that basis, I see not evidence of fault on the part of Barchester.

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Final decision

25. My view is Barchester was not at fault in the way it increased Mrs K’s residential care fees. This is because the Brighterkind care agreement was assigned to Barchester which then increased the fees in compliance with that agreement. I am unable to determine the fairness of the fee variation clause by reason of the operation of the Core Term Exception.

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Investigator's decision on behalf of the Ombudsman