A query which arises often is that regarding what happens after a repossession. Council Tax liability does not pass to the mortgage company and an owner should be aware of this when a property is being repossessed.
Council Tax liability and repossession
Council Tax liability determines whose name will be shown on a demand notice (regardless of whether there is anything to pay or not) . Section 6 of the Local Government Finance Act 1992 determines that the owner of a property remains ordinarily liable for the Council Tax charge both whilst they are resident and also when the property is unoccupied.
A common misconception is that the Council Tax liability will end when a property is repossessed – this is incorrect and Section 6 of the Local Government Finance Act 1992 makes no mention of repossession when determining Council Tax liability .
A repossession occurs under the Law of Property Act 1925 however the mortgage company only take possession of the property, they do not become the legal owner for Council Tax purposes.
What happens to the empty property ?
Although the owner loses legal access to the property they are still responsible for any Council Tax charges which may become due for the property. Until it is sold or re-occupied they remain liable under Section 6 of the Local Government Finance Act 1992.
Legislation permits the liable person (the owner of the property) to claim a Class L Council Tax exemption from the date the property is re-possessed until such time as it is sold or re-occupied. To claim the exemption the owner needs to provide the local authority with proof of the re-possession although in most cases the mortgage company will advise the council – note that the mortgage company don’t have to as they are not legally responsible for the Council Tax charge.
What about any period between leaving and the repossession ?
The owner would need to look at claiming whatever reduction (if any) the local authority offer on an unoccupied property. Once re-possessed a Class L exemption can be claimed.
What if the court ordered I leave ?
The same situation applies as above – although the owner loses legal access to the property they are still responsible for any Council Tax charges which may become due for the property. Until it is sold or occupied they remain liable under Section 6 of the Local Government Finance Act 1992.
Section 13 of the Local Government Finance Act 2012
Section 13 of the Local Government Finance Act 2012 laid out an amendment to Section 6 of the Local Government Finance Act 1992. This amendment would make a mortgage company responsible for Council Tax from the date of its repossession. This section however has not yet been implemented and awaits an order from the Secretary of State to confirm an implementation date.
The Valuation Tribunal technical manual confirms that
The LGFA 2012 amended the hierarchy of liability in England to allow a future Statutory Instrument to be made which would ultimately make mortgagees in possession liable for dwellings with no residents (i.e. financial institutions would be responsible for council tax in respect of repossessed properties). However, no Statutory Instrument has been made, so the amendment is currently not in force (see section 13(1) LGFA 2012).
Discretionary help with payments
If you are having problems with paying any Council Tax charge which falls due then you can make an application for a discretionary reduction under Section 13A of the Local Government Finance Act 1992.
Assistance from LGFA92
This article is solely the view of LGFA92, the Council Tax agents and experts, based on our interpretation of legislation. Your local authority is free to dispute this view. A binding decision may require the intervention of a valuation tribunal.
For further, written, assistance on this matter we’d be happy to provide a quote.
Contact us today. Email us at email@example.com, Call us on 0191 6451118 or try the chat box below.