We have been getting a number of queries regarding council tax liability on our helpline recently so we thought it was about time that we revisit some past cases and the relevant legislation and answer a few of our frequently asked questions.
Who is liable to pay council tax?
As a starting point, Section 6(2) of the Local Government Finance Act 1992 sets this out thus:
Persons liable to pay council tax.
(1)The person who is liable to pay council tax in respect of any chargeable dwelling and any day is the person who falls within the first paragraph of subsection (2) below to apply, taking paragraph (a) of that subsection first, paragraph (b) next, and so on.
(2)A person falls within this subsection in relation to any chargeable dwelling and any day if, on that day—
(a)he is a resident of the dwelling and has a freehold interest in the whole or any part of it;
(b)he is such a resident and has a leasehold interest in the whole or any part of the dwelling which is not inferior to another such interest held by another such resident;
(c)he is both such a resident and a statutory , secure or introductory tenant of the whole or any part of the dwelling;
(d)he is such a resident and has a contractual licence to occupy the whole or any part of the dwelling;
(e)he is such a resident; or
(f)he is the owner of the dwelling.
Local authorities will therefore first see if there is someone who falls into para (a), and if not will move onto para (b) and so on.
Following this list, it is clear that where the owner of the freehold interest (the Landlord) is no longer a resident of the property and has entered into a tenancy or created a licence with another party who is resident of the property i.e. there is someone who falls into one of categories a-e above, he will no longer be responsible for the payment of council tax. However if there is no-one liable under a-e, council tax liability falls on the owner.
Who is the “owner” for the purposes of section 2(e)?
In Section 6(5) ‘owner’ is defined as a person having a material interest in the whole or any part of the premises. Section 6(6) further defines ‘material interest’ as being either a freehold interest or a leasehold interest which is granted for six months or more.
Therefore the “owner” for the purpose of this section can mean not only the owner of the freehold interest ( i.e. Landlord), but also in some cases the tenant ( owner of leasehold interest).
What happens if the tenant is no longer resident?
Where the tenant leaves the property before the end of a fixed term of six months or more (without giving notice in line with a break clause or agreeing a surrender with the landlord), the tenant would be the “owner” for the purposes of Council Tax liability and therefore the tenant would continue to be liable for council tax. This liability would only continue until either the tenant’s valid notice has expired or the landlord accepts to implied surrender and takes back possession.
However, what about when fixed term has ended and a statutory periodic tenancy has arisen. This situation was considered in the case of MacAttram v London Borough of Camden  EWHC 1033. This case concerned a three year fixed term contract with Camden who used the property to house homeless applicants. After an initial fixed term the tenancy became a statutory periodic tenancy and Camden continued to pay the monthly rent although there were no longer any occupiers residing in the property. Camden had then stopped paying rent and tried to surrender the tenancy. To add insult to injury, they then presented the landlord with a council tax bill for the time that the tenancy was a periodic tenancy.
As neither the landlord nor tenant was a resident during this time, the court explored the definition of ‘owner’.
The Landlord, Mrs MacAttram tried to argue that as the original tenancy had been granted for three years, Camden continued to have a material interest in the property when the tenancy went periodic. However, it was held that the periodic tenancy was a new tenancy and not a continuation of the original fixed term. As the tenancy ran from month to month, Camden was not considered to have a material interest as it had not been granted for six months or more.
It is worth noting that whilst this would mean that the local authority can require a landlord to pay the council tax from the date that the tenant vacates, this does not affect the contractual relationship between the landlord and tenant. As such, you should ensure that your tenancy agreement contains a clause that states that the tenant is responsible for council tax until the end of the tenancy (and most well drafted agreements will define the tenancy to include any holdings over or statutory periodic tenancies etc) so that the landlord in turn can recover this money from the tenant.
Who is responsible for council tax where the property is an HMO?
It is important to note that the definition of an HMO for the purposes of council tax liability is different to the definition provided in the Housing Act 2004. We have already posted a blog on this case, Goremsandu R (on the application of) v London Borough of Harrow  EWHC 1873 (Admin), but for those of you that missed it the case can be summarised as follows:
A group of tenants occupying the property on a single AST, 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. As the tenants were jointly and severally liable and the tenants did have access to the conservatory should they have wished, liability fell to the tenants.
However where a property is an HMO for Council Tax purposes then the landlord has the primary liability for Council Tax. If part of the demise is excluded from the tenancy ( e.g. a locked room) so that there is no liability to pay rent on the dwelling “as a whole”, or the tenants have a licence to occupy only part of the dwelling, then the landlord will remain liable for Council Tax.
The tenants left owing in excess of £11,000 in Council Tax. Harrow tried to make the landlord pay it.
The full post can be found here.
What if the landlord is storing items or restricting access to parts of the premises?
Landlords should be careful where they are storing possessions at the property or restricting the tenant’s access to parts of the premises. A common example is where the tenancy agreement specifically excludes the loft from the tenancy. In these situations the owner can be pursued by the local authority for the council tax. Again, the landlord would be able to pursue the tenant for any council tax he has paid if the tenancy agreement states that the tenant is liable to pay it.
Who is entitled to any council tax discounts when the property is vacant?
Local authorities now have the discretion to charge full council tax on empty properties, but can choose to offer a discount. You will need to contact your local authority to find out if they have an exemption period of offer any discounts.
We receive a lot of calls from the agents and landlords whose tenants have vacated the property a month early and later find the council tax exemption period has already been used by their former tenants. Unfortunately for landlords hoping to use any discount themselves to bridge the gap between tenants, tenants are able to make use of any empty house exemptions. Of course this is only if they are no
longer living in the property and have taken all their belongings with them.