Council tax exemptions and the importance of checking the tenancy agreement
Part 2 of this blog series looked at the HMO test under the Council tax regulations, click here to read my previous blog.. This blog will look at exemptions and how the tenancy agreement itself can affect who has to pay council tax.
Do any exemptions apply?
It is important to note that council tax is only payable on dwellings which are not exempt. One of the most common exemptions is the student exemption. If you let your property entirely to students and they fall within the exemption then council tax is not payable. This is the case even if the owner/landlord is liable as the exemption attaches to the dwelling and not the person who is liable to pay.
Check your contract
It is important to note that despite the statutory rules, there is nothing stopping the landlord and tenant from agreeing who is responsible to pay council tax and incorporating this into the tenancy agreement. For example, although the landlord may be liable to pay under the HMO test, the landlord could pass this charge on to the tenants. In most cases the landlord will do this simply by increasing the rent payable. However, landlords should be wary that if the council tax is included in the rent and it suddenly increases it may be difficult to pass that increase on to tenants. Therefore it is sensible to include a clause requiring tenants to reimburse the landlord for any increases in council tax.
Where landlords are not liable to pay, they should be careful to review the terms of their tenancy agreements to ensure the terms set out the correct position. If there are clauses in the agreements that say the landlord will be responsible for paying council tax (perhaps because the landlord mistakenly thought they would be liable because the property is an HMO under the Housing Act 2004) the landlord could be contractually liable to pay under the terms of the agreement, regardless of what the statute says. The contractual terms agreed between the landlord and tenant prevail.
Council tax and HMOs are complicated areas of law and often specialist advice is needed. Sometimes the VOA will band a property incorrectly or the local authority will serve council tax demands on the landlord when they are not actually the liable person. Many council tax demands are generated automatically by computers and without much scrutiny. Appeals lie first to the local authority and then to the Valuation Tribunal. We have had success challenging council tax demands on behalf of landlords and raising appeals on the issue of whether a property should be classed as an HMO and whether the landlord should be liable to pay council tax.