Funding Information Sheet
Public Funding, The Statutory Charge
As you are already aware you have the benefit of Legal Aid that will fund the costs of the legal advice and representation that you will receive in respect of your matter and also the associated expenses known as “disbursements”. A costs estimate has been provided to you on the accompanying letter. This is not a request for payment but it is a requirement that we provide you with this information as there are certain circumstances when you will have to repay some or all of the costs covered under your public funding certificate. This is referred to as the “statutory charge”. This Information Sheet will provide specific information about the statutory charge and when you may have to repay our costs and other important information. This Information Sheet should be read in conjunction with the Client Care Letter that you will have also received. You should keep this Information Sheet safe as you may need to refer to it in the future.
If we recover (gain) or preserve (keep) money or property for you (either as a result of settling the case or as a result of a Court Order), the LAA may require that some or all of your legal costs be deducted from this. The amount to be deducted (if any) will depend on the amount your opponent pays towards your costs. The amount recovered by way of costs from an opponent rarely covers the entire costs in preparing the case. Alternatively, the opponent may not be ordered to pay anything. The LAA is entitled to deduct the difference from your award or settlement. This deduction is called the “statutory charge”. This is explained in more detail below.
If property is recovered or preserved, then the LAA may postpone the charge and place a charge (i.e. mortgage) on your property and register such charge against the property. This will have to be repaid with interest before or at the time the property is disposed of. Under certain circumstances, the LAA will consent to transfer that charge from the property to another property to enable you to purchase another house. Again, this is explained in more detail below.
If you recover or preserve property or money as a result of your case you will probably have to pay back some or all of the costs. In this respect legal aid is treated like a loan and you will have to repay it. This is because the Legal Aid Agency (LAA) are required by law to recover the money spent on cases in such circumstances.
You will be advised at the start of your matter whether the statutory charge is likely to attach to your case. In some cases, it will not be obvious at the start that you will recover or preserve property or money and therefore if this becomes apparent at any
time during your case, you will be advised at that stage. As a general rule, if you stand to recover or preserve money or property as a result of your case, it is likely that you may be expected to repay the costs funded by your legal aid.
If you are obliged to repay our costs, our bill with either be assessed by the LAA or the Court. This is to ensure that our bill is fair dependent upon the type of case and the work that we have carried out for you. A copy of our bill will be sent to you and you have a right to comment on it. Our bill may be reduced on assessment by the LAA or Court and you will only have to repay the total amount of our bill following assessment. You do not pay any costs incurred in the assessment process.
If you pay contributions towards the cost of your legal aid during the case, these will count towards paying off the amount that you owe.
In some cases, the Court may order that your opponent has to pay some or all of our fees. If so, and you recover or preserve property or money, then you will have to pay less back to the LAA.
If you have recovered or preserved money as a result of your case we have to keep this money until our bill has been assessed. We then have to take the total of our bill from the monies and send this to the LAA. We are then able to give you what’s left. If you have made contributions towards the cost of your legal aid either from your savings or each month from your income, the LAA will calculate what you have already paid and deduct this from the amount that you owe.
For example is you receive the sum of £20,000 at the end of your case and our costs are £5,000 and you have paid £3,000 already by contributions towards your funding, the amount that is owed to the LAA is £2,000 and you will receive the remaining £18,000.
If you are recover or preserve money, and wish to buy a home with this money, the LAA may let you repay the statutory charge later. In these circumstances the LAA will ‘register a charge’ on your new property to make sure that you repay the money eventually. However if you are able to repay the amount that you owe immediately without risking losing your home the LAA will not let you delay the repayment.
If you have recovered or preserved property, you can delay repayment by having a charge registered on your property. A charge is a record with the Land Registry which officially recognises that the LAA have a claim over the property equal to the amount of
money that you owe. By registering a charge, the LAA secure the loan of legal aid to you against the value of your home, as if the loan were a mortgage. This is sometimes referred to a postponing the charge.
As above the charge will be the amount of our bill, minus the total of any contributions you have made and any costs paid by the other side. If you recover or preserve a property and can repay the cost of your legal aid straight away, you won’t need to have a charge registered on your home.
If you ask to postpone repaying the money that you owe, the LAA will ask you some questions about your finances to see if this is reasonable. If the LAA think that you are able to repay the money straight away, they will ask you to do so. Depending on your financial circumstances, the LAA may allow you to repay your debt over a longer period as long as you make regular payments towards it. In such cases the LAA will register a charge on your property until you have repaid all of your debt.
If you can’t repay the whole amount you owe straight away and ask to postpone the payment by having a charge on your property, the LAA will add interest to your debt. This is by way of simple interest and means that the same sum of money is added to your debt each day. The current rate of interest is 8%.
Once a charge is registered, you will have to pay the LAA the charge before you can complete the sale of your home. After this you can only use your home as security for a further loan (borrowing money against your home – known as refinancing) if you will be using that loan to pay off the charge owed to the LAA.
Once a charge has been registered against your home you can pay off the charge in regular instalments, or in one lump sum. The charge will remain on your house, normally accruing interest, until you have repaid it all to the LAA. The LAA determine that regular instalments means paying £25 or more every month to reduce your debt.
If you are able to, you can repay the money in one lump sum instead of in instalments. You may be able to do this out of your savings or income. Alternatively, you can pay the LAA back out of the money you get from selling your home or borrowing money against it (known as refinancing). Once you have paid the total sum owing, the LAA will remove the charge from your home.
If you have any questions about the information contained in this Information Sheet, or you require anything explaining to you please contact the office.
