Houses in Multiple Occupation (HMO) are a major source of Council Tax queries and disputes. Dealing with HMO’s can be a massively timely task, for all parties, and for which there is often not a good outcome.
What is a Council Tax House in Multiple Occupation (HMO) ?
The Council Tax (Liability for Owners) Regulations 1992 (as amended) is the legislation which supplies the definition of a HMO for Council Tax purposes. This is different to definitions used for other purposes (i.e. The Housing Act 2004) and it should be noted that a HMO for licensing purposes is not automatically one for Council Tax purposes.
A ‘Class C’ dwelling defines a Council Tax HMO qnd is one which:
(a)was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household;
(b)is inhabited by a person who, or by two or more persons each of whom either—
(i)is a tenant of, or has a licence to occupy, part only of the dwelling; or
(ii)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.
Note that ‘single household’ is not defined in Council Tax legislation.
Who pays the Council Tax charge on a HMO ?
Under the Council Tax (Liability for Owners) Regulations 1992 (as amended) the ‘owner’ (this being the ‘council tax’ definition of owner) is responsible for paying the Council Tax charge on a property if it meets the above definition of a HMO.
For Council Tax purposes the ‘owner’ is determined under s6 of the Local Government Finance Act 1992 . The owner is the person who meets the definition:
“owner”, in relation to any dwelling, means the person as regards whom the following conditions are fulfilled—
(a)he has a material interest in the whole or any part of the dwelling; and
(b)at least part of the dwelling or, as the case may be, of the part concerned is not subject to a material interest inferior to his interest;
“resident”, in relation to any dwelling, means an individual who has attained the age of 18 years and has his sole or main residence in the dwelling.
“material interest” means a freehold interest or a leasehold interest which was granted for a term of six months or more;
It should be noted that there are cases where a property that may appear to be a HMO is not regarded as a HMO and each of the rooms is instead banded individually for Council Tax purposes.
Common Council Tax problems encountered with HMOs
It is a common occurrence for Local Authorities to look at a property which has multiple occupants and straight away start assuming that the property is a Council Tax HMO, without checking to see what the terms of their occupancy of the property is. If nothing else, a landlord should make sure that the tenancy agreements are clear as to what they intend for the property and make sure this is communicated to the Local Authority to head off any disputes as soon as possible.
Another common problem which occurs with HMO’s is for the tenants to be paying the Council Tax themselves and for the Local Authority to later discover that the property is actually a HMO. In these sorts of case the Local Authority have no option but to amend the Council Tax liability retrospectively and, as part of this, they should refund the tenants any monies they have paid. The landlord will then receive a large backdated demand notice that they need to pay – the Local Authority often only need to allow14 days for payment of this amount so fast action can be critical.
Council Tax discounts and exemptions
Council Tax discounts and exemptions for HMO’s are another common problem, read our piece on them here.
A spanner in the works from the Valuation Tribunal ?
It would appear that in some cases the Valuation Tribunal are applying a piece of 1949 case-law (John Laing & Son Limited v Kingswood Area Assessment Committee) which bypasses the standard Council Tax route of determining a HMO and instead treats each room as an independent dwelling instead of a room in a HMO. As yet this is not a common occurrence however the possibility this can occur should not be neglected.
In properties where John Laing & Son Limited v Kingswood Area Assessment Committee has been applied by the Valuation Office agency the occupancy of each individual dwelling will need to be looked at and the actual Council tax liability considered – the new dwelling may or may not be a HMO.
Advice & Assistance from LGFA92
Good quality help with your Council Tax dispute can be hard to come across – there’s a lack of independent, expert, places where you can get the help you need however LGFA92’s Council Tax advisor is here to change that. See how we can help today
Contact us today. Email us at [email protected], Call our Council Tax helpline on 0191 6451118.
This article is solely the view of LGFA92, the Council Tax 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.