In May 2005 the Office of Fair Trading produced its report "Care Homes for Older People in the UK".

Among the areas discussed in that report were the contracts entered into by self-funded residents. The OFT found that there were problems with the majority of contracts that self-funded residents have with their care homes. Two thirds of contracts had fee related terms that were either unfair or unclear, and in almost half it was unclear who should pay what amount.

In March 2005 OFT action led to 10 care home operators changing their contracts and the OFT has warned that it will continue to take action against contracts which have unfair terms. It is therefore essential that you ensure that your contracts comply with current OFT guidance.

The main examples of unfair terms that the OFT refer to are:

• those which allow frequent or arbitrary increases in residents’ fees

• those which impose unfair penalties, restrictions or obligations on the resident

• those allowing exclusion of liability for loss or damage to a resident's property (even due to fault on the part of the care home)

• those which impose other unclear charges or are not specific about how long fees are payable after death.

The legislation that covers residents' contracts is the Unfair Terms in Consumer Contracts Regulations 1999 and specific guidance has been issued by the OFT on Unfair Terms in Care Home Contracts (Doc OFT635).

Although it is ultimately the courts which will decide whether a contract is unfair, a care home can significantly reduce the risk of any costly legal action by reviewing their contracts before a problem arises.  It seems that the message has been received by many care home providers in the 3 year period since the publication of the OFT report.  We have carried out numerous contract reviews for existing clients during this time.

If you require further advice on this matter please contact a member of the Care Homes team to arrange a contract review

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