The Local Government and Social Care Ombudsman has ordered Croydon Council to repay £75,000 in care fees that were wrongly charged to a resident, after the council’s errors forced her family to sell her home to cover the costs. The Ombudsman upheld a complaint against the council for failing to recognise the late resident’s entitlement to free aftercare under Section 117 of the Mental Health Act.
Council failed to record Section 117 eligibility
The report, published on June 29, centres on a woman referred to as Mrs X, who was detained in hospital under Section 3 of the Mental Health Act in 2020. Section 117 of the Act states that people detained under Section 3 are entitled to free mental health aftercare following their discharge. The support is intended to help meet their ongoing needs and reduce the risk of them requiring further hospital treatment.
Section 117 aftercare must be provided free of charge, regardless of a person’s income, savings or property ownership. However, when Croydon placed Mrs X in a care home in March 2024, the council failed to record her Section 117 eligibility on her care file, losing track of her entitlement to free care. A month later, the council ceased funding her placement and incorrectly informed her family that she would have to pay privately.
Family misled into selling home
Her grandson and attorney, referred to as Mr K, was told that Mrs X would have to fund her care privately because she owned her own home. A council welfare officer later confirmed by email that the financial assessment team had deemed her a “full cost privately funded client”. Believing they had no other choice, the family sold Mrs X’s house to pay the care bills. In the report, the Ombudsman concluded this decision was made “as a result of the misinformation” provided by the council.
The council’s error was eventually identified by a new social worker in March 2025, who found that Mrs X should not have been charged for her care. When the family complained and sought reimbursement, the council initially argued that Section 117 funding applied only to Mrs X’s mental health needs and not to the “older adult frailty” care she was receiving in the care home. However, the Ombudsman strongly rejected this argument, saying the council's initial response took a “limited view” of the aftercare funding. They also added that it “was unhelpful to her family and caused further confusion”.
Ombudsman orders repayment and compensation
Despite the correction, Mrs X died in April 2025. The Ombudsman concluded that “the injustice she suffered cannot be remedied.” In their decision, the Ombudsman found clear “fault” in the council’s application of the Section 117 process, which caused “significant financial injustice” to Mrs X’s estate. Croydon Council was ordered to repay the full £75,000 in care fees wrongly charged to Mrs X, along with interest at the base rate to compensate for the financial loss incurred. The council were also required to pay £500 to Mr K in recognition of the distress caused by the errors.
The investigation also highlighted wider concerns over the council’s understanding of Section 117 requirements. The council admitted there was “insufficient knowledge about s117” among staff and that its funding panel was unaware of Mrs X’s eligibility. This was partly due to the lack of documented evidence of Mrs X’s Section 117 needs between 2020 and 2025. “Had that been available, it would have been possible to consider her status at each point when her care needs changed. That did not happen,” the Ombudsman added.
Council commits to staff training and paperwork changes
To prevent future errors, the council has committed to mandatory in-person training for social care and finance staff. It will also redesign its paperwork to make Section 117 eligibility more prominent and harder to overlook. A spokesperson for Croydon Council said: “We are very sorry that we failed to apply the Section 117 process correctly as part of the financial assessment and needs review of our resident, and for the impact that this had on her family. We have apologised and are compensating her family for the care home fees that were incorrectly charged and for the distress caused.”
