Council Tax and HMO
There have been many enquiries regarding the position of landlords letting property and being caught by Council Tax Regulations on who pays council tax – Landlord or Tenant
The Owner
is defined as the person entitled to possession, this includes leaseholders. The owner is only liable where no one has their sole or main residence in the property ( the property is empty) or as provided by the the owner rather then the occupier is liable in the following cases:
- Nursing homes and other similar homes (class A).
- Houses of religious communities (class B).
- Houses in multiple occupation (class C).
- Residences of staff who live in houses occasionally occupied by an employer (class D).
- Residences of ministers of religion (class E).
- Accommodation provided for occupation by asylum seekers (class F).
If two or more people have an identical interest, ie they are joint owners, then they are each jointly liable and the charge is collectable from either person. Men and women who are married or living together as husband and wife are also jointly liable.
Who Pays Council Tax ?
A property can be defined as an House in Multiple Occupation (HMO) within the terms of the Council Tax regulations. This means that the property has, or has potential for, any of the following characteristics:
- Occupation by more than one person with occupiers forming separate households.
- Construction or adaptation in such a way as to allow more than one household to live in the property.
- Design, construction or adaptation for use as an HMO even when only one person is in occupation.
In an HMO the tenant/licensee occupies only part of the property and is only liable for rent for the part they occupy. An example would be where the tenant is liable for rent on an individual room basis and shares a bathroom and toilet with other tenants. The council makes the decision about a property’s desgination as an HMO and the landlord is liable for paying the tax. The landlord can appeal the decision to the Valuation Tribunal, which is an independent body.
So for this purpose – What is a House in Multiple Occupation (HMO)?
A house in multiple occupation is any type of dwelling which:
- Was originally constructed and subsequently adapted for occupation by persons who do not constitute a single household; or
- is occupied by one or more people, each of whom -
- is a tenant or licensee if part only of the house, flat etc. or
- has a licence to occupy the dwelling as a whole but who does not pay rent or licence fee for the whole dwelling.
In general, the landlord owner will therefore be personally liable and billed for the Council Tax on HMO properties. If their tenancy agreements allow for it, landlords can increase rentals to cover their Council Tax liability. Similarly those tenants on Housing Benefit will receive consideration for increases in their rent.
What is a Single Household?
There is no legal definition of what constitutes a single household. The expression ‘household’ and membership of it is a question of fact and degree. Similar circumstances may result in a different outcome depending on the extent to which the varying constituents are present.
For instance, no one would argue that a family consisting of parents and children was anything other than a single household. However, many households contain individuals who are not related to each other but still regard themselves as a single unit. The considerations below are neither exhaustive nor in any order of priority but should prove useful guidance:
- the size of the household
- the size of the dwelling
- the type and extent of any communal living
- use for temporary periods only
- use of share facilities
- the degree of anonymity
- the extent to which independent lifestyles are pursued
- did the group come to the property as a group or were they recruited separately?
- are external locks fitted to bedroom doors?
- How are the utility bills resolved?
Is the dwelling let in parts?
The first thing to establish is whether your accommodation is classed as self contained e.g. one of a number of self contained flats within a house, or whether yours and any other residents rooms are all valued as one single dwelling, i.e. is there one or more Council Tax assessment?
If Individual rooms are let to specified individuals with separate tenancy agreements rather than the whole accommodation being let to a group of joint tenants, the dwelling will be classed as an HMO.
If the dwelling is classed as HMO, the owner rather than the occupiers will be liable for payment of Council Tax.
There is a vital difference between these two types of landlord and tenant agreement. In one case an individual is held liable for rent in respect of a specific room. However, each of a group of joint tenants can be held solely liable for the rent of an entire house.
In a recent case Goremsandu v London Borough of Harrow the Council took the landlord to court for Council Tax as per the definition in Regulation 2 Council Tax (Liability for Owners) Regulations 1992.
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.
However a High Court appeal overturned the decision on this occasion -Landlords should be aware of this when they use separate contracts for tenants rather than a collective tenancy
