New mandatory section 8/13 forms
Council tax is a common point of contention, often due to a lack of understanding of the regulations.
It is therefore important that landlords get it right in order to avoid unexpected bills or legal action by local authorities.
Who is liable to pay council tax?
Liability for council tax is worked out on a daily basis based on criteria set in law (i.e., a tenancy agreement clause cannot change the legal liability).
If a property is let to sharers on individual tenancies then that property is an HMO for council tax purposes and the landlord is liable for council tax.
Otherwise, liability is determined using the hierarchy below (Section 6 the Local Government Finance Act 1992). The person, or persons, liable for council tax is, by decreasing priority:
(a) a resident with a freehold interest in the whole or any part of it;
(b) a resident with a leasehold interest in the whole or any part of the dwelling which is not inferior to another such interest held by another such a resident;
(c) both a resident and a statutory, secure or introductory tenant of the whole or any part of the dwelling;
(d) both a resident and has a contractual licence to occupy the whole or any part of the dwelling;
(e) a resident;
(f) the owner of the dwelling.
When determining liability, local authorities go through that list from top to bottom and check if someone meets condition (a), then condition (b), and so on.
If more than one person meet the same condition they become jointly liable.
Note that a resident is defined as “an individual who has attained the age of 18 years and has his sole or main residence in the dwelling”.
Temporary visitors are therefore not considered residents and, more importantly, a tenant who has moved out is not either.
What happens if the tenant is no longer resident?
As per the list above, if the tenant is no longer a resident and there are no other residents then the liability falls back on the ‘owner’.
However, the definition of ‘owner’ is crucial:
“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;
“material interest” means a freehold interest or a leasehold interest which was granted for a term of six months or more;
Therefore, a tenant who is no longer resident only remains liable for council tax until the end of the tenancy if that tenancy is for a term of at least 6 months.
If the tenancy is a periodic tenancy, including a statutory periodic tenancy, and the period is less than 6 months, then the landlord becomes liable for council tax as soon as the tenant is no longer resident, even if the tenancy continues.
HMO for council tax purpose
The owner is liable for council tax if the property is a House in Multiple Occupation (HMO) for council tax purpose.
However, the definition of HMO is different than the one in the Housing Act 2004 and used for licensing and other regulations, which causes confusion for many landlords.
For council tax purpose the definition of a HMO is as follows (Class C in Regulation 2, Council Tax (Liability for Owners) Regulations 1992):
A dwelling inhabited by persons who do not constitute a single household, each of whom either–
(a) is a tenant of, or has a licence to occupy, part only of the dwelling; or
(b) 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.
This means that any property let per room on individual tenancies is considered a HMO for council tax purpose and therefore the landlord is liable for council tax.
Restricting access to part of the property
If a landlord reserves part of the property for his own use, e.g. for storage, council tax liability is not affected and the rules above continue to apply.
Residents of the property are liable unless the property is an HMO for council tax purposes.
The right tenancy agreement
Landlords should ensure that their tenancy agreements include a clause making tenants responsible to them for council tax.
Such a clause does not change the liability to the council, which is set by law. However, it allows the landlord to seek reimbursement from the tenant for any council tax he might have to pay to the local authority.
As it might be uneconomical and uncertain to chase an ex-tenant after the end of the tenancy, it is good practice to withheld a reasonable amount from the tenancy deposit until any council tax bill has been received.
When letting to sharers on individual tenancies, either the rent should be inclusive of council tax, or the tenancy agreement should make clear that the landlord will pass on the council tax’s cost and apportion it fairly amongst tenants.
- Local Government Finance Act 1992
- Council Tax (Liability for Owners) Regulations 1992
Relevant case law
- Goremsandu v. London Borough of Harrow  EWHC 1873 (Admin)
- MacAttram v. London Borough of Camden  EWHC 1033
- CT v. Horsham District Council  UKUT 617 (AAC)