HMO, AST and Council Tax query

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    HMO, AST and Council Tax query

    Hi all,

    Apologies if this has been asked before, however I couldnt find an exact answer; seems to be the answer is what ever the Council decides i think.. but would appreciate perspectives.

    Background
    Father has a property which is a 3 floor victorian property; has let to 4 x students using a single AST agreement. Property let from 2001 to current.

    The tenants came as a single group, were not family but knew each other and allocated rooms themselves and managed leavers etc; each time someone left the single AST was amended and copy re-issued to the group.

    They share 2 x bathrooms, living room, and sitting area - remaining rooms let to the 4 tenants with locks on doors.

    Over the years (2001-2007) we have had issues with the council where they provided conflicting information, sometimes claiming it was joint tenancy then it was HMO, then claiming we were taking Housing benefit for students (which we werent!) issuing multiple reference numbers, taking payment from students for CT then refunding them..and generally confusing us with conflicting and contradictarory letters, cant contact the same person at council office etc etc.

    in 2007 tired of the hassle, we agreed with tenants we would pay and incorporate into rent - therefore to date we are current with Council tax.

    Council is claiming Council tax is owed from 2001 to 2007 and we (landlord are liable) - as the now claim the property is HMO they want CT from 2001 to 2007..

    Last year they advised property was a HMO and they sent someone to inspect (dec2010) who advised the property is a HMO as it is 3 storey high with locks on doors.

    in dec 2010, we asked for formal decision in writing - whilst waiting for letter from council - Bailifs were sent to fathers home with letter demaning monies!.

    Council acknowledged they hadnt bothered sending letter and finally sent letter formally advising property is HMO and allowing 28 days suspension of unwarranted bailiff action to address letter; 5 days letter they sent more bailifs with another letter..!! At wits end and seekign legal advice at the incompetence of Birmingham City council Revenues to communicate with anyone and explain HMO.

    I know the HMO regs changed a few times 2004 then 2006.

    I am unsure and wanted to know if it is due to the latest change in 2006 that the property becomes a HMO and we (the landlord) are liable for Council tax? from 2001 to 2007 the tenants tried to pay council tax, some succesfully, some not (having money refunded back to them by council!)..

    My main point of arguement is the Sheffield v Barnes case with helpful indicators would say our property is not HMO, therefore AST is valid with the clause that tenants are liable for CT (which they had agreed to).

    If the HMO regs changed in 2006 then we should be liable for CT from 2006 to 2007 - can the council claim for CT during a period (2001to2006)when Sheffield v Barnes would state the property is not a HMO?

    apologies for long email - wanted to get all relevant info across! appreciate any advice.

    thanks

    #2
    The number of contracts is a red herring - a HMO can have a joint contract or multiple contracts.

    Your property IS a HMO because it has more than 2 people forming 2 or more households.

    "Last year they advised property was a HMO and they sent someone to inspect (dec2010) who advised the property is a HMO as it is 3 storey high"
    This is true, but it is only a licensable HMO if there are 5 or more occupants (not tenants) or it is in an area the council have specified for additional licensing (likely if the area is packed with other shared housing).

    If the council hold you liable for council tax - which I believe they will be successful with - you will have to pay it. They won't accept 'I can't afford' and non-payment of council tax is one of the few debts for which you can be imprisoned.

    HOWEVER, no matter what the legislation may or may not decide, if you have to pay, then you can claim the council tax back from any tenents who agreed to be liable for council tax in their agreement. If you no longer know where they live, you can use a service like findermonkey to find them.

    Please be aware that if the council discover that more than 4 people have been occupying the property, ie it is a licensable HMO, and you have no HMO license (and therefore no HMO safety inspections) then you could face considerable penalties.

    Comment


      #3
      I've just had a similar council tax request

      Its for a 3 bed flat that i rent 3 rooms out to 3 seperate people

      They pay all the bills inc council tax, as per their contract

      The council have written to me stating that i have to pay it as it's an HMO

      Shouldnt they be charging the tenants 3 ways? And cant we claim council tax relief as they are all on housing benefit?

      And is it true that non payment of council tax can lead to a prison sentance? Even if a company manages the property and is liable for the payment - could the directors get jailed?

      Comment


        #4
        You can't have 3 council tax bills for the same property - the council will bill you, and then (as your agreements seem to permit this), you bill the tenants.

        3 months is the max imprisonment, but the debt doesn't get written off: http://www.direct.gov.uk/en/MoneyTax...rs/DG_10013198

        I am not sure about imprisonment of directors for non-payment, but that wouldn't stop the council obtaining and enforcing a court order for the council tax - which ultimately could result in the company being liquidated to pay the debts.

        Comment


          #5
          Thanks

          Can't I claim council tax relief as they are homeless?

          If I put them all on one contract, would the bill go on their name?

          Comment


            #6
            Originally posted by medlock View Post
            Thanks

            Can't I claim council tax relief as they are homeless?
            But they're not homeless - they are living in your HMO.
            If I put them all on one contract, would the bill go on their name?
            Yes, BUT... To do this you would have to get the tenants to voluntarily surrender their current tenancies (or evict them), and then start a new joint one. You would need to reprotect a joint deposit, and take a new joint inventory. They may not be willing to take on responsibility for each others debts, nor for the rooms that they currently have no responsibility for (kitchen, bathroom, hallways etc). You can not force this upon them. And, of course, this would not alter the situation you currently have.

            Comment


              #7
              Scimitar,

              As the tenants are students do they have a council tax exemption certificate? I'm not sure if it makes any difference if the liability belongs to the LL but it's worth looking into. They each need to obtain one from student services, I had to provide them when I was a student, and get a new one each year.

              I hope this makes a difference, it sounds like the council are a nightmare to deal with!

              Comment


                #8
                I think you should also review the outcome of this 2010 High Court Case re Student HMOs: http://nearlylegal.co.uk/blog/2010/0...d-council-tax/

                One of the tests proposed by the High Court is if the landlord has exclusive access to any parts of the HMO (i.e. the tenants cannot access it) - if so, then Council Tax is liable. Else, the tenants are liable (or not if they are students).

                I'm not a legal person here, so probably bollixed up the summary - have a read.

                Comment


                  #9
                  I come across this sort of situation quite frequently.

                  It essentially comes down to whether there are seperate agreements with the tenants, or whether they are joint tenants under a single agreement. With the former, the landlord is liable for CTAX, however with the latter, the tenants are JnS (Joint and severably liable).

                  The lines are however often blurred...

                  In many cases, there are seperate agreements under the guise of a single AST. I often see AST's with names scribbled out and new ones added, with each tenant making rent payments to the LL individually. This is essentially a HMO for CTAX purposes.

                  You refer to the group "managing leavers" with the AST being amended which suggests to me that this applies to your situation.

                  Comment


                    #10
                    Originally posted by medlock View Post
                    And cant we claim council tax relief as they are all on housing benefit?
                    Yes surely you should be able to claim council tax exemptions if they are claiming benefits. If they are students, they are exempt too. Just get an exemption letter from the student (they get it from there college tutor or student services). To be fully exempt though everyone would need to be claiming benefits or be a student otherwise you may just get a discount of perhaps 25%.

                    Asking at the council offices is your best bet.
                    I may be vague but if it starts you off in the right direction then we are on a winner.

                    Comment


                      #11
                      HMO's and Council tax

                      Hia I am trying to weigh up whether its worth having a HMO, if my tennants are on a joint tennancy but pay individually then I am liable for CT? Could tennnats pay someone who pays me and then would it be considered a single payment? How much CT it is a band G, would i have to pay four single rate CT? Are there business rates? How much are they?
                      Any insight would be very helpful thanks.
                      Joseph


                      Originally posted by IronsE11 View Post
                      I come across this sort of situation quite frequently.

                      It essentially comes down to whether there are seperate agreements with the tenants, or whether they are joint tenants under a single agreement. With the former, the landlord is liable for CTAX, however with the latter, the tenants are JnS (Joint and severably liable).

                      The lines are however often blurred...

                      In many cases, there are seperate agreements under the guise of a single AST. I often see AST's with names scribbled out and new ones added, with each tenant making rent payments to the LL individually. This is essentially a HMO for CTAX purposes.

                      You refer to the group "managing leavers" with the AST being amended which suggests to me that this applies to your situation.

                      Comment


                        #12
                        Is this 100% true? If all tenants are on full housing benefit, would i be exempt from paying council tax?

                        I tried calling them, but they were so rude requesting payment that i had to hang up!

                        Comment


                          #13
                          Originally posted by medlock View Post
                          Is this 100% true? If all tenants are on full housing benefit, would i be exempt from paying council tax?
                          No. It all depends on who is liable to pay the CTAX.

                          This is determined by whether the property is classed as a HMO for CTAX purposes. I have previously alluded to some of the factors that determine this, but I will have a word with a colleague and see if I can get some definitive guidance.

                          If the property is classed as a HMO, you are liable for the CTAX regardless of the circumstances of the residents. If the property is not classed as such, the residents of the property will be held liable for the CTAX as per the hierarchy of liability:

                          Resident freeholder
                          Resident leaseholder
                          Resident tenant
                          Resident contractual licensee
                          Resident
                          Non-resident owner (and then back up the list)

                          If the residents are held liable for CTAX, you (by definition) are not liable to pay it, and so are effectively exempt.

                          Your post suggests that you have been made liable for the CTAX, therefore the circumstances of your tenants are irrelevant.

                          Comment

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