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.