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Council tax liability for houses in multiple occupation (HMOs)

SDAS consultancy case study

I have a client who lives in a house in multiple occupation (HMO). The local authority has billed them for council tax at the property.

Is my client liable for council tax? If not, how would they go about challenging this?

Is a tenant liable for council tax in an HMO?

No, a tenant is not liable for council tax if the property is classed as an HMO for council tax.

Read about the HMO definition for council tax liability on Shelter Legal. It is a different definition of an HMO to the one in the Housing Act 2004 although the two frequently overlap.

Some examples of HMOs for council tax are:

  • bedsits

  • homelessness hostels

  • nurses’ accommodation

Even if only one person lives in the property, it might still be an HMO if it was originally built, or later adapted, for occupation by multiple households and the tenant or licensee can only occupy part of the property.

How to determine whether a property is an HMO for council tax

There are two tests in the Council Tax (Liability for Owners) Regulations 1992 for deciding whether a property is classed as an HMO for council tax.

Only one of these tests needs to be met.

The first test: construction or conversion of the property

The first test is met if the property was originally constructed or converted for occupation by more than one household. For example:

  • are there extra cupboards in the kitchens or other areas?

  • has the property been adapted with separate lock fittings for the bedrooms?

  • do the residents have their own private facilities such as kitchenettes, toilets or showers?

If the property has been constructed or adapted in this way, it is likely that it is an HMO for council tax.

In this case your client would not be liable for council tax.

The second test: occupation of the property

The second test is met when the property is occupied by one or more people, each of whom is a tenant or has a licence to occupy only part of the property. The occupiers don't have to be liable for rent.

If the tenancy or licence agreement does not confirm this, what happens in reality is important. For example:

  • is the occupier liable to pay rent for only part of the property?

  • does the occupier have access to shared facilities but not all the bedrooms in the property?

If either of these apply, the property might be an HMO for council tax.

If this is the case, your client would not be liable for council tax.

Case law on council tax in HMOs

In Hardy v Sefton MBC [2006] EWHC 1928 (Admin), the court held that three individuals, who each had a tenancy agreement to occupy a named room within the property, did not constitute a single household. The property was an HMO and therefore the owner was liable for the council tax.

In R (on the application of Goremsandu) v Harrow LBC [2010] EWHC 1873 (Admin), the High Court held that joint tenants who were not related but had exclusive possession of the whole property under a single tenancy agreement, and who made a single rent payment per period for which they were jointly and severally liable, were not living in an HMO. This was the case even though the landlord kept the conservatory locked. The tenants were still the tenants of the whole property. The tenants were liable for council tax.

In Shah v Croydon LBC [2013] EWHC 3657 (Admin), the local authority claimed that the property was an HMO under the Housing Act 2004 and therefore the landlord was liable for council tax. The High Court confirmed that the definition of an HMO under the Housing Act 2004 was irrelevant for the purposes of deciding liability for council tax. The two tenants living in the property had separate tenancy agreements for the whole property and were therefore not living in an HMO. The tenants were therefore liable for council tax.

Challenging council tax liability

If a tenant believes they are living in an HMO for council tax purposes and wants to challenge their liability, the first step is to make a formal complaint to the local authority. The tenant should provide as much evidence as possible, including the tenancy agreement and statements from other tenants in the property.

Appeals must be made in writing, and the tenant should refer to the right of appeal to the Valuation Tribunal at an early stage.

Valuation tribunal

If the local authority rejects the complaint or does not respond within two months, the client can make a further appeal to the Valuation Tribunal under s.16 Local Government Finance Act 1992.

The Valuation Tribunal hears appeals about:

  • liability

  • banding

  • entitlement to a discount, a reduction or exemption

  • how the amount of council tax due has been calculated

If the local authority applies for a liability order to enforce the bill because the tenant has not paid, the tenant can request an adjournment of the liability order hearing on the basis that they have begun the appeal process with the Valuation Tribunal.

Complaint to the ombudsman

The Local Government and Social Care Ombudsman also deals with complaints about how a local authority administers council tax. This can include decisions on council tax liability.

Time limits for challenges

There is no time limit for making a formal complaint to the local authority. The authority has two months to respond.

An appeal to the Valuation Tribunal must normally be made within two months of the date the local authority notified the tenant of their decision, or within four months of the date the initial appeal was made if the local authority does not respond.

The Valuation Tribunal can extend this time limit in certain circumstances.

There is more information about council tax appeals in the CPAG Council Tax Handbook.

Further resources

Read more about the definition of an HMO on Shelter Legal.

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