Shah v Croydon LBC [2013] EWHC 3657 (Admin) [Not on Bailii yet. Seen full transcript of judgment]

An appeal by way of case stated from a Magistrates Court decision that a property owned by Mr Shah was an HMO and that Mr S was therefore liable for some 14 months Council Tax. And an illustration of the confusion of the multiple definitions of House in Multiple Occupation floating around.

Mr S owned a property with two tenants. Croydon had brought a prosecution on the basis that the property was an HMO and Mr S liable for the Council Tax. The Magistrates had decided that i) the property was an HMO in accordance with the provisions of the Housing Act 2004 and ii) that Mr S was liable to pay the Council Tax, as the two tenants ‘had their own rooms and shared the rest of the property’.

Mr S appealed and, after some considerable confusion around a change of solicitors, the appeal was heard. The High Court dealt with the issues fairly straightforwardly.

i) The Housing Act 2004 definition of an HMO (the HMO Management regs, not the HMO licensing regs. Do keep up) applied to a property with three or more unrelated individuals, but this had nothing to do with council tax liability, which was governed by regulation 2 the Council Tax (Liability For Owners) Regulations 1992. The HA 2004 issue was simply irrelevant.

ii) There were two tenants in the property during the relevant period. Mr S argued that each had a tenancy agreement for the whole of the property. Class C of reg 2 provides:

“The class is a dwelling which:

(a)  Was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household,” and
(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.”

Thus, if someone or someones is a tenant of the whole of the property, the property is not an HMO for council tax purposes and the landlord/owner is not liable for CT.

Croydon had argued, and the Magistrates had found, that the tenancy agreements meant that the tenants were entitled to a bedroom each and sharing the rest of the house. There was no finding that the tenancy agreements were a sham or that they had been superseded by individual licences.

Soor & Anor v London Borough of Redbridge [2013] EWHC 1239 (Admin) had approved the approach that:

it would be an “exceptional case” in which the liability set out for rental in a written agreement (which is not a sham) should not be the liability recognised by a Valuation Tribunal. Pausing there, the same must apply to a Magistrates’ Court dealing with the same issue.

While The UHU Property Trust v Lincoln City Council, [2000] (otherwise unreported) was a case of such exceptional circumstances, in which it was found that despite the tenancy agreement, the landlord had come to accept “that there was no liability on the part of the occupants to pay the whole of the rent on a joint and several basis” despite the tenancy agreement not being a sham, it was clear on the evidence in that case that the circumstances were other than the tenancy agreement provided.

The Magistrates had been referred to Goremsandu, R (on the application of) v London Borough of Harrow [2010] EWHC 1873 (Admin) (our report) As we noted on that decision:

The High Court criticised the basis on which the Tribunal had approached this matter. The starting point for their investigation should have been the tenancy agreements the parties had entered into. The statements by the tenants referring to paying their ‘shares’ of the tenancy simply expressed the fact that the rent for the property was shared among them. It did not undermine the agreement itself and the right of the landlord to hold them jointly and severally liable for the rent. It also did not mean that the tenants did not enjoy full access to the property.

In the present case, the evidence was not straightforward, as there was no tenancy agreement in evidence for one of the tenants for part of the time. However, there were tenancy agreements for both the tenants for the remainder of the period at issue, and also for another subsequent tenancy, which were all in the same terms, suggesting that this was a standard form for Mr S. In addition the tenant for whom there was not a tenancy agreement had been the sole tenant for some 2 years, during which time the Council accepted he was liable for council tax. This could only be on a tenancy of the whole property.

The agreement provided

under paragraph 6:
i. “The landlord agrees with the tenant that the tenant has the right to possess and enjoy the property during the tenancy without any interruption from the landlord, or any person claiming through or in trust for the landlord.”
As one might expect, clause 8 states that “where the context permits, the property includes any part of the property”.

On the face of the agreement, the Magistrates could not find, as they had, that each tenancy was of a room and sharing the rest of the house. While one of the tenant’s HB claim stated that ‘I rent only one room in the house’,

you would expect in any case in which there is more than one tenant in a property (if those tenants are not either married or partners occupying the same room) that the tenants would be sleeping in separate bedrooms. Perhaps they would also be sharing the communal areas, but as the case of Goremsandu makes very clear this sharing (in and of itself) does not mean that they are not entitled to occupancy of the house as a whole. What matters is what they are legally entitled to in exchange for the payments of rent they are making to the landlord.

There was no restrictive licence that would be required for an HMO and there was no evidence which would allow the Magistrates to come to the conclusion that the arrangements were otherwise than the tenancy agreement. It was not a UHU exceptional case and, rightly, the Magistrates had not found a sham.

As an aside, Croydon’s argument that it was not even open to the Magistrates to enquire whether a property was an HMO, that being a matter for the Valuation Tribunal, got short shrift. On s.23(6) of Council Tax (Administration and Enforcement) Regulations 1992, the High Court said:

Sub-paragraph 6 provides:
i. “The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid.”

It follows therefore, as a matter of plain English, that in order to be able to make
such an order, the magistrates must be satisfied: (a) that the specific sum which is being claimed has become payable, (b) that it has not been paid, and (c) that the person who is liable to pay it is the defendant. It cannot possibly reach that conclusion without considering the calculation of the amount, or any other matter or factor which goes to the question of whether or not the right person is being asked to pay.

Paragraph 57 of the 1992 regulations, relied on by Croydon, just stopped an aggrieved person from initiating proceedings in the Magistrates, instead directing them to the Valuation Tribunal. It didn’t stop a defence in the Magistrates that the person was not liable.

Appeal allowed, though Mr S’s former solicitors delaying in coming off the record, and not doing anything in the meantime, resulted in him getting the costs of the appeal hearing only, but no other costs, including preparation.

And, might I add, an object lesson in the perils of taking a point of law, even of liability, before the Magistrates.