Council Tax in HMOs

An interesting new case in the High Court which was highlighted by the excellent NearlyLegal blog.

Where a property is an HMO for Council Tax purposes then the lanldord has the primary liability for Council Tax. The test for an HMO is different from that set out in the Housing Act 2004 and is provided by the Council Tax (Liability for Owners) Regulations 1992. This says:

The following are the classes of chargeable dwellings prescribed for the purposes of section 8(1) of the of section 8(1) of the [LGFA]-
Houses in multiple occupation, etc
Class C a dwelling which
(a) was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household; or
(b) is inhabited by a person who, or by two or more persons each of whom either-
(1) is a tenant of, or has a licence to occupy, part only of the dwelling; or
(2) has a licence to occupy, but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of the dwelling as a whole.

In this case there were a group of tenants occupying the property on a single AST. As is common in these cases they were each paying a ‘share’ of the rent direct to the landlord. The conservatory at the property was unusable because the tenants had placed all of the landlord’s furniture in it (by agreement) as they had no use for it.

The tenants left owing in excess of £11,000 in Council Tax. Harrow tried to make the landlord pay it. The landlord appealed to the Valuation Tribunal who focused on the issue of the tenants paying ‘shares’ of rent and the inaccessibility of the conservatory and therefore found against the landlord.

The landlord appealed to the High Court. The High Court held that the Tribunal should have started by looking at the tenancy agreements. On the evidence there was nothing in the paying of shares that undermined the basic position that the tenants were jointly and severally liable for the rent and had access to the whole of the property. The conservatory was clearly available to the tenants on the evidence had they wished to clear it of the landlord’s furniture and use it.

The Tribunal had erred in law by assuming that payment of shares of rent equated to an HMO. The correct test was whether “the rent charges gave rise to a licence whereby they only occupied part only of the dwelling or whether they were paid in respect of part only of the dwelling.”

This is important as a great many local authorities are aggressively pursuing landlords in respect of tenants who fail to pay their council tax. This can usually be avoided by putting all tenants on a single agreement and not reserving any part of the proeprty for the landlord’s own use or storage.

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