The Government introduced new legislation in November 2023, to commence December 1st 2023.

This was regarding changes to the way Council Tax is charged in HMOs (House of Multiple Occupation).

This legislation can be seen here, and was in two parts:

  1. Disaggregation: The legislation ceased the practice of disaggregating (splitting up) HMOs to charge Council Tax for individual rooms.
    Councils that had previously split up HMOs were ordered to re-aggregate, making the entire unit of accommodation liable for Council Tax.
    However, complications will arise when the unit contains a mix of self-contained and room lets.
  2. Council Tax Responsibility: The new legislation intends to band all HMOs as a single dwelling, making owners responsible for Council Tax.
    However, the definition of “owner” includes individuals with a material interest in the dwelling, and this includes tenants with tenancy agreements lasting at least six months.
    Therefore, where an HMO is let on a room-by-room basis, the landlord is responsible, but where it is let to any number of people on one agreement, the tenants are liable.

The reasoning for the unintended consequence of the Council Tax Responsibility is rooted in the legislation hierarchy, specifically in the Local Government Finance Act 1992 and the Council Tax (Liability for Owners) (Amendment) Regulations 1993, and is explained below:

  1. In the legislation it clearly states the owner is liable if the property is an HMO.
  2. Local Government Finance Act 1992, Section 6 gives the hierarchy of liability, stating the owner has ultimate responsibility.
  3. However, Clause 5 states the owner is anyone who ā€˜has a material interest in the whole or any part of the dwellingā€™, anyone with tenancy agreement is deemed to have a material interest (see 5 below). A material interest is one that was granted for at least 6 months.
  4. The Council Tax (Liability for Owners) (Amendment) Regulations 1993, Section 2 defined an HMO as
  1. A dwelling constructed or subsequently adapted for occupation by persons who do not constitute a single household;or (amended in 1995)
  2. Is inhabited by a person, or two or more persons who either:
    1. is a tenant of any part of the dwelling, or
    2. or has a licence to occupy the dwelling as a whole
  3. In Section 2a of the same Regulation, relevant material interestā€ means a freehold or leasehold interest in the whole of theĀ dwellingĀ  i.e. any number of tenants on one agreement.Taken with point 3 above, this means that where there are any number of tenants on one agreement they are liable for the Council Tax.
  4. Note that Schedule 14 of the Housing Act 2004 specifies what is excluded from being an HMO. All these exclusions are ignored in the new Act, including that an HMO has to have more than 2 people (Schedule 14(7).This means that any number of people on one agreement are liableĀ  for the Council Tax.

 

Note that a video of this explanation can be seen here.

With thanks to DavidĀ d’Orton–Gibson, Managing Director at Training for Professionals, for this explanation.

 

The Government has written to all Councils to advise them of these changes (the letter can be seen here) but has stated that ā€˜council tax liability rests with the landlords of HMOs covered by the regulationsā€™.

As stated above, we believe this to be incorrect, and will be contacting all councils in the Southeast (including London) to state why we will be advising members that the situation is still the same, i.e.:

  • Where a property is let on one agreement for the whole unit, regardless of the number of tenants, the tenants are responsible for paying the Council Tax.
    Provided it is a let of 6 months or more, Fixed Term, followed by Contractual Periodic.
  • Where the property is let on a room-by-room basis, the landlord is responsible for paying the Council Tax.
    Technically, the landlord must add the Council Tax to the rent, not charge it separately, as legislation only allows Council Tax to be paid direct to the Local Authority.