A person’s ability to understand, retain and weigh information relevant to decisions about buying or selling property can sometimes be impacted by the presence of a cognitive impairment. In these important legal transactions, ascertaining whether a person has capacity to make the decision is crucial. An assessment of mental capacity will determine whether the individual understands the implications of their decision. In this article, we’ll explore how the presence of a cognitive impairment can sometimes affect a person’s mental capacity to complete property transactions and the importance of safeguarding individuals in such situations where they are not able to make the decision for themselves.
What is mental capacity?
Mental capacity refers to a person’s ability to make their own decisions. In the context of property transactions, this means understanding the nature and consequences of capacity to sell and buy property. Under the Mental Capacity Act 2005, a person is considered to have capacity if they can:
- Understand the information relevant to the decision.
- Retain that information for long enough to make a decision.
- Weigh up the information to reach a reasoned conclusion.
- Communicate the decision, whether verbally, in writing, or through other means.
In property transactions, mental capacity involves understanding the financial implications, long-term consequences, and legal responsibilities associated with buying or selling property. If a person does not fully grasp these elements, they may lack mental capacity in respect of these decisions, which could lead to unintended or harmful outcomes.
Health conditions that can lead to some cognitive impairment
Several health conditions can impair a person’s cognitive functioning. Sometimes this means that it is difficult for them to make certain decisions and they may lack capacity to make these decisions. Some common conditions that may affect a person’s cognition, and therefore the ability to make decisions about buying or selling property include:
- Dementia and Alzheimer’s disease
- Dementia is one of the most common conditions that can affect cognitive functioning, leading to reduced mental capacity, particularly in older adults. As the condition progresses, it can cause confusion, memory loss, and difficulty understanding complex information. This can make it challenging for an individual to comprehend the salient details of a property transaction, such as mortgage terms, the value of the property, or the implications of selling an asset.
- Alzheimer’s disease, a specific form of dementia, has a similar impact on cognitive abilities, which might make it difficult for individuals to retain and process the necessary information for such transactions.
- Congenital Brain Injury
- Sometimes, people born with congenital brain injury such as hypoxic ischaemic encephalopathy (lack of oxygen to the brain), hydrocephalus (excess fluid on the brain) or cerebral palsy can have symptoms of cognitive impairment, including difficulties with communication and speech, learning disabilities and associated difficulties with understanding, memory and processing information.
- Acquired Brain Injury
- Some people experience the occurrence of brain injury at a point in their lives, such as traumatic brain injury through an accident, stroke, brain tumour, brain haemorrhage and encephalitis. This can affect cognitive and executive functioning.
- Mental Health diagnoses
- Sometimes, cognitive impairment can be a symptom of different types of mental health diagnoses. For example, Bipolar disorder, characterised by prolonged depressive episodes, where a person may lack the motivation or clarity to engage in decision-making, contrasted by manic episodes, which might mean that a person might make impulsive decisions which are ordinarily out of character and without the ability to weigh their decisions.
- Schizophrenia is a severe mental health condition that can impair a person’s ability to think clearly, manage emotions, and make rational decisions. People with schizophrenia may experience delusions or hallucinations, which can distort their understanding of reality. This might mean that it is difficult for them to assess the true value of property, understand contracts, or make informed financial decisions.
- Severe depression might make it difficult for a person to be able to focus, retain information, or weigh the pros and cons of a decision. This could lead to poor financial choices, such as undervaluing property or agreeing to unfavourable terms when selling or buying.
How capacity is assessed in property transactions
When there is doubt about a person’s mental capacity to engage in a property transaction, a mental capacity assessment should be conducted. This assessment is carried out by a qualified professional, such as a doctor, social worker or other registered healthcare professional, who evaluates the individual’s ability to understand, retain, and evaluate the necessary information.
The assessment focuses on the specific decision at hand—in this case, capacity in buying or selling property. The assessor will determine whether the individual can comprehend and retain the financial and legal implications of the transaction for long enough to be able to make the decision, weigh the information, and communicate a decision.
If the individual is found to lack capacity, they would not be able to proceed with the transaction. In such cases, representatives, such as Deputies or those holding Lasting Power of Attorney (LPA) for financial affairs, may need to step in to make decisions on the individual’s behalf. The decision should always be made in the best interests of the person who lacks capacity to make the decision for themself.
Protecting vulnerable individuals
It is crucial to ensure that people who may have difficulty in understanding, retaining and weighing information (in addition to there being a cognitive impairment present) are fully supported during property transactions; that a mental capacity assessment is sought where there is any doubt that the person might not be able to make the decision for themself and that their rights and interests are protected. Here are some steps to safeguard vulnerable individuals:
- Early identification of capacity issues
- If a person shows signs of struggling to understand or engage in decisions concerning property, it’s important to identify these issues early. Families, carers, and professionals should be aware of any cognitive changes that may affect decision-making.
- Seek professional advice
- If there is any doubt about an individual’s capacity to manage property transactions, a mental capacity assessment should be arranged. The outcome of this assessment will determine whether the person is able to make the decision for themselves and that any transaction made is legally sound.
- Use of Lasting Power of Attorney (LPA)
- If someone lacks capacity for decisions about buying or selling property, having a Lasting Power of Attorney in place allows an appointed Attorney to manage the person’s property and financial affairs. This can help to safeguard and protect the individual’s assets and ensure that decisions are made in their best interests.
- Court of Protection
- In cases where there is no LPA and the person lacks capacity, the Court of Protection can appoint a Deputy to make decisions on their behalf, including property transactions. Again, this ensures that decisions about property (and finances) are made in the best interests of the person concerned.
