Council Tax repossession and the Class L exemption

By | October 31, 2016

repossessionA query which arises often is that regarding what happens after a repossession. Council Tax does not automatically 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 Рthis 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 occupied. They remain liable under Section 6 of the Local Government Finance Act 1992.

Legislation permits 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 occupied. To claim the exemption the owner needs to provide the local authority with proof of the re-possession.

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).

Assistance from LGFA92

This article is solely the view of LGFA92 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.

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