Houses in Multiple Occupancy
As a house in multiple occupation (HMO) owner, am I liable to pay council tax?
There are several definitions of a house in multiple occupation (HMO). The fact that a property is considered an HMO for another purpose, such as environmental health or housing, does not mean it is an HMO for council tax purposes, and vice versa.
The rules governing who is liable to pay council tax when the property is a house in multiple occupation (HMO) are complex. The definition of HMO for council tax purposes is different from that contained in the Housing Act 2004 and used in the context of residential property licensing. Whether or not your property is an HMO for council tax purposes is important because where the property is an HMO, the owner is liable to pay council tax.
An ‘owner’ for the purpose of Council Tax is:
(a) the person who has a relevant material interest which is not subject to a relevant material interest inferior to it; or, if there is no such person
(b) the person who has a freehold interest in the whole or any part of the dwelling. In part a) "relevant material interest" means a freehold or leasehold interest in the whole of the dwelling."
Definition of a HMO in the Council Tax legislation: A dwelling which:
For council tax purposes, HMOs are domestic properties:
(a) originally built or later adapted for occupation by people who do not make up a single household; OR lived in by a person who (or by two or more persons where all of them) either –
(i) is a tenant of, or has a licence to occupy, part only of the property; or
(ii) has a licence to occupy, but is not liable (whether alone or jointly with anyone else) to pay rent or a licence fee for the whole property.
A property can become (or cease to be) an HMO on the basis of the tenancy agreement(s) in existence at any given time. For instance:
- If a property is let to two people on a single tenancy agreement requiring them to pay £2000 per month between them, and the full rent on the dwelling would remain payable even if one of them were to leave, there is a joint tenancy and the tenants are liable.
- If the same property is subsequently let to two people with separate agreements requiring them to pay £1000 per month and giving each the right to occupy part only of the dwelling, it becomes an HMO and the owner is liable.
- If one of the occupiers moves out and the one remaining continues to pay £1000 per month for the right to occupy part only of the dwelling, it remains an HMO even though there is only one occupier.
It can sometimes be very difficult for the council to work out whether a property should be treated as an HMO for a particular period of liability. Tenancy agreements (or licences) may not be available, or those provided by the tenant may not match those supplied by the landlord or agent. They may also overlap, or the landlord or agent may have used the wrong form. It may, therefore, be necessary to ask for further information such as proof of rent paid and to contact additional parties such as other tenants.
If a household is occupied solely by qualifying students, it will be exempt. However, if a non-student moves in, or an existing student abandons his/her course, a liability is created. If the property is occupied under a joint tenancy, the bill is issued in the name of the non-student; if it is let as an HMO, the owner will be billed.
Some properties, although in multiple occupation, comprise flats with their own cooking, washing and toilet facilities. As such flats are self-contained, they are considered by the Valuation Office Agency (VOA) to be individual dwellings in their own right, and will be given their own entry in the valuation list. In this case, we must bill each occupier separately.
To meet demand, some landlords have improved their properties by equipping them with additional facilities. If the VOA becomes aware of this, it may split the property into separate dwellings for council tax purposes. This means that where several flats within a building become empty, the landlord will have a separate bill for each flat.
If a tenant who is liable for council tax abandons a property with a period left to run under a tenancy that was granted for 6 months or more, s/he remains the “owner” under the hierarchy of liability for the remainder of the term and thus remains liable for council tax, unless the owner takes steps such as changing the locks to prevent them reoccupying, takes occupation him/herself, or re-lets it.
Letting agents will never be liable for council tax unless they have taken on a tenancy themselves and are sub-letting the property. However, bills can be sent care of the agent if requested by the owner.