HMOs and Council Tax

Goremsandu, R (on the application of) v London Borough of Harrow [2010] EWHC 1873 (Admin)

As many of you will know the definition of an HMO for the purposes of Council Tax is totally different from that used in the Housing Act 2004 (and in relation to planning uses classes). It is, however, an important definition because where a property is an HMO the Council Tax (Liability for Owners) Regulations 1992 require that the owner is the person who has the primary liability to pay the Council Tax, even if they then pass on that charge to the tenants.

In this case G owned a property with a conservatory which she had let to four tenants from October 1999. Crucially the tenants were on a single tenancy agreement and were jointly and severally liable for breaches. After a series of renewals the tenancies came to an end in December 2007 with the tenants finally vacated in February 2008 after holding over as periodic tenants for a short time. The property had been let furnished but the tenants did not wish to use the furniture and had, by agreement with G, placed it into the conservatory. This basically rendered the conservatory unusable. Towards the end of the occupation G built a new two-room extension to the property which joined it by way of the conservatory. This was completed shortly before the tenants moved out and G had apparently moved into the extension about 2 weeks before vacant possession was given up by the tenants. It seems that the tenants had not paid the entirety of their Council tax and London Borough of Harrow (LBH) then sought to recover the outstanding sums along with bailiff’s fees from G, a figure in excess of £11,000. She took the matter to the London (North West) Valuation Tribunal who gave a decision dated 23 June 2009. This decision was then appealed to the High Court.

The case for LBH and the decision if the Tribunal turned on their interpretation of regulation 2 Council Tax (Liability for Owners) Regulations 1992. This states:

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.

The Tribunal found as facts that each tenant was liable to pay their rent separately to G and also that she had restricted access to the conservatory. They did so primarily on the basis of evidence submitted by the tenant’s through LBH. They discounted the tenancy agreements which were expressed to be in the name’s of all the tenants. The Tribunal also found that G had restricted access to the conservatory. Based on these findings the Tribunal found that the property was an HMO for the purposes of Council tax and the money was payable.

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.

With regard to the conservatory the evidence showed that the tenants retained a right of access to it and that it was filled with the landlord’s furniture because of their choice, albeit with the landlord’s consent.

By failing to give effect to the tenancy agreements the tribunal had applied the law incorrectly. They had also applied the test in the regulations incorrectly. The Tribunal had taken the view that individual rent charges equated to an HMO whereas the test in the regulations was whether “the rent charges gave rise to a licence whereby they only occupied part only of the dwelling or whether they were paid in respect of part only of the dwelling.” On the facts the individual rent charges, in so far as they existed, were paid to allow access to the whole of the dwelling and so the decision by the Tribunal was incorrect.

Appeal allowed.

About D

D is a solicitor specialising in landlord and tenant matters with a London firm.
Posted in Assured Shorthold tenancy, Housing law - All, Regulation and planning and tagged , , .

10 Comments

  1. Pingback: Council Tax in HMOs « Painsmith Landlord and Tenant Blog

  2. This decision confirms our iterpretation of the regulations. We have
    been in dispute with Liverpool City Council for several years about
    this situation. We have challenged them to take one of our members to
    court but they have always backed down. We suspect that they have
    nonetheless collected many thousands of pounds from landlords
    unlawfully. North West Property Owners Association.

    • Hello,
      I have read your comments with interest and have a question of my own in respect of a similar matter.
      I own a large victorian semi detached house and have 9 tennants (9 rooms), each unrelated and i have applied for a HMO licence not yet issued. I have planning permission for the building to be a HMO from the LA.
      However, the VOA have listed the building as 3 separate apartments. There are no physical barriers between the 3 floors save a central staircase each floor therefore not being self contained, with no open market value for either sale for rental. I am currently appealing the VOA decision that it is infact either a HMO or 1 dwelling under the HA 2004. I would like to know if the LGFA 1992 (Council tax)is a lower class of law than the Town and country planning act (Planning Law)!. My argument is that surely council tax can’t be applied as 3 apartments when i dont have legal planning permission for 3 apartments????

      Kind regards

    • Neil
      As it says in our comment policy, I’m afraid we can’t give advice on individual’s issues via the blog.

    • Neil
      I am really interested in your situation Neil as I have come across it elsewhere. It might be useful to discuss this together. I am happy to put my email address on here if it is allowed.

    • Dave

      It isn’t a good idea to have your email on public display. However, if Neil wants to email me – via the ‘about’ page – I’ll pass your email on.

  3. I have a situation where I have a two tenant flat share, I telephoned the council before doing the tenancy agreements as I did not want to be liable for anything and was advices to give them each a tenancy, so that is what I did, it states it’s for a flat share and it gives no exclusive use to any part of the property, it’s up to them how they share.After 10 months the council said I am liable for council tax and have sent me a backdated Bill. The tenancy states the tenants are responsible and they signed it, so I am out of pocket, the council emailed a web link about HIM but that gave a minimum of three persons and said they had to occupied part of the property . Then the council said ” it’s at their discretion ” so that seems to cover what they want it to cover

  4. Pingback: HMOs and Council Tax - The Landlord Law Blog

  5. Are landlords able to contract out of the CT (LO) Regs 1992 and pass the liability on to tenants, on separate AST’s who occupy specified rooms / areas in the property – as indicated by the last sentence in your main piece?

    • There is a statutory hierarchy which determines who pays CT to the Council; there is no provision for that hierarchy to be displaced by contract. “Who ultimately bears the CT, as between the landlord and tenant?” is a different question to “Who pays the CT over to the Council?”

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