NURSING home owners who took a North-East council to court when they tried to cut fees are hailing a legal victory.
The Registered Nursing Home Association, which represents a thousand nursing homes across the UK, said the ruling against Redcar and Cleveland Borough Council in the High Court had national implications.
Following a two day hearing His Honour Judge Gosnell ruled that the price paid by councils to care home owners must give due regard to the actual cost of care.
The RNHA said the judgement in favour of the Redcar and Cleveland Independent Providers Association meant that local authorities can no longer force nursing homes to provide care for less than it actually costs.
The RCIPA took legal action after the council tried to cut fees it pays home owners for providing 24 hour care.
The council was ordered to look again at what would constitute a fair settlement.
Mr Frank Ursell, chief executive officer of the RNHA, said: "This judgement makes it clear that councils must pay fees that are sufficient to meet the assessed care needs of older people going into nursing homes."
Councillor Sheelagh Clarke, cabinet member for health for Redcar and Borough Council, said: "Whilst we are disappointed with the result, it is a fact that we have paid the highest rate for residential care of any local authority in the North-East.
"The council has always been committed to making sure people in residential care receive a high-quality service. However, in these difficult financial times, we must make sure that we receive value for money and make every penny count.
"The council will now undertake a new fee-setting process in consultation with providers to make sure that we pay the right price for the right care."
Michelle Mitchell, charity director general of Age UK said: "We understand that many local authorities are struggling to protect frontline social care services but would encourage them not to drive private care home providers to the wall through enforcing unfair rates.
"For residents the closure of a care home could be a disaster so local authorities should manage the local care market to ensure that there is a supply of stable and financially viable homes."