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Council Tax liability when the Tenant has gone AWOL

In Leeds County Council and Broadley the Court of Appeal held that a tenant who had abandoned a property without proper notice was “the owner” of the dwelling within s.6 of the Local Government Finance Act 1992 (“the 1992 Act”) and therefore liable for Council Tax. The tenancy was a periodic tenancy and the council were arguing that this meant that the landlord was liable for tax for the empty property. The landlord took the view that the tenant was liable until the end of his proper notice period. The Council have now applied to the Supreme Court for permission to appeal the Court of Appeal decision.

The Court considered the terms of the tenancy and the 1992 Act when reaching the above decision.

The relevant terms of the tenancy agreement were:

“Whereas the landlord agrees to let the premises known as…..for a term of [6 or 12] months and thereafter continuing on a monthly basis unless terminated by either party under the provisions of Clause 3
(b) To pay….Council Tax…charged in respect of the property during the tenancy……”

The crucial question in respect of the 1992 Act was whether the tenancy agreement created a leasehold interest for six months or longer, which is the period required (by section 6(5) and (6) of the 1992 Act) for a person to be an “owner” of a dwelling and thus liable to pay council tax.

Leeds City Council was arguing that, the question of the identity of the owner “depends on whether it is legally possible to have what has been described as a ‘continuation tenancy’ namely a single property interest comprising of [sic] both a fixed and periodic term.” They stated it was not possible and contended that the tenancy agreement created two tenancies. First the fixed term, then a second periodic tenancy. Consequently, that the second periodic tenancy would not create a 6 month interest making the tenant liable for tax only if he is resident in the property.

But the Court of Appeal held that the grant in the form such as that in the present case is a single grant for a fixed term followed by a periodic tenancy thereafter. Pursuant to section 1(1) of the Law of Property Act 1925:

The only estates in land which are capable of subsisting or of being conveyed or created at law are- …… (b) A term of years absolute.”
Section 205(1)(xxvii) defines “term of years absolute” as:
“…means a term of years . . . either certain or liable to determination by notice, re-entry, operation of law, or by a provision for cesser on redemption, or in any other event (other than the dropping of a life, or the determination of a determinable life interest); . . . and in this definition the expression ‘term of years’ includes a term for less than a year, or for a year or years and a fraction of a year or from year to year; . . .

The Council had argued that a single tenancy cannot be both a fixed term tenancy and a periodic tenancy as this would offend the principles of certainty established by the Law of Property Act. The Court on the other hand found that a term such as that granted (for a fixed period of months and then from month to month) fell clearly within s.205, either expressly or because the paragraph envisages the possibility of creating a periodic tenancy.

The Court concluded that the term granted by Mr Broadley was a single grant for 6 or 12 months certain and then continuing from month to month and clearly, such a grant constituted a “material interest” within the meaning of s.6(6) of the 1992 Act. It is therefore, pursuant to that grant that the tenant holds the tenancy, whether during the fixed term or thereafter. Accordingly, the Tribunal and the lower Court was correct in finding that the tenant’s liability continued while the tenancy subsisted as a periodic tenancy even where the tenant has gone AWOL.

This case will mean that some landlords and agents will want to consider a tenancy that states that any following periodic tenancy is contractual rather than statutory periodic. This will prevent the landlord being held liable for the empty property council tax contribution which may be due when the tenant leaves the property in some boroughs.

The PainSmith AST does not have such a clause but it does have a clause that requires a tenant to reimburse the landlord for council tax paid by the landlord during the tenancy. This will mean that a landlord required to pay when a tenant has left without proper notice should be able to recover that money from the deposit.

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