CeMAP MRT1 Regulated Mortgage Contracts, Borrower Types & MCOB Roles question: advanced dementia and lacks capacity to make financial decisions

CeMAP MRT1Regulated Mortgage Contracts, Borrower Types & MCOB Roles

Edward, 81, has advanced dementia and lacks capacity to make financial decisions. His daughter holds a registered lasting power of attorney for property and financial affairs. The family wants to raise money on Edward's home to pay for his care. What is the position?

A Edward can sign the mortgage himself, as long as a doctor witnesses his signature on the mortgage deed
B His daughter can borrow in her own name against Edward's home, because the LPA makes her a co-owner
C Edward cannot contract himself; any borrowing must be by his attorney, within the LPA and in his best interests
D No borrowing is possible at all, because a property and financial affairs LPA can never be used to take out a mortgage

Show the answer and explanation

Answer: C. Edward cannot contract himself; any borrowing must be by his attorney, within the LPA and in his best interests

A person who lacks capacity cannot make a valid decision to borrow (Mental Capacity Act 2005 ss2-3). An attorney under a registered property and financial affairs LPA can make financial decisions for the donor, including about property, but must act within the authority given and in the donor's best interests (Mental Capacity Act 2005 ss4 and 9). The LPA does not make the attorney an owner, and a witness cannot supply capacity Edward lacks. Without an LPA, the Court of Protection would need to appoint a deputy.

Common mistake

Thinking an attorney becomes the owner, or that nobody can ever borrow for a person without capacity.

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