How do I determine whether my property is an HMO for council tax purposes?

The first points to consider are the extent of the chargeable dwelling and the basis of the tenants’ occupation. Click here to read part 3.

The extent of the ‘dwelling’

Council tax is payable on ‘chargeable dwellings’ which are not exempt. Therefore, the first step in determining who is liable to pay council tax is to establish the dwelling on which council tax is chargeable. This can be unclear where a property is multiply occupied. In some circumstances, the entire property may be classed as one dwelling and placed within one council tax band by the Valuation Office Agency (VOA). In other situations, the VOA may decide that each room within a multiply occupied property constitutes a separate dwelling and should be banded separately. The VOA have produced guidance on the banding of HMOs.

Each case is fact specific but whether a property is banded as one or multiple dwellings usually depends on the extent of adaptations to the property and the degree of self-containment within the individual units. A shared house where the tenants occupy the whole property may constitute a single dwelling, whereas in a house that has been fully converted into separate bedsits, each bedsit may constitute a single dwelling and be banded separately. This distinction can significantly affect the level of council tax payable.

Basis of occupation

Once the extent of the dwelling or dwellings has been established then you have to look at the occupation of the dwelling to determine whether it is an HMO. This involves applying the HMO test set out in the council tax regulations.  Here are some common scenarios.

1. Three friends occupy a shared house under a joint tenancy agreement. The friends have allocated rooms between themselves but under the terms of the tenancy agreement the whole house is let to the friends jointly and they are all liable for the whole rent. While this property may be an HMO under the Housing Act 2004 (and could potentially be licensable under some local authority licensing schemes) it may not be an HMO for council tax purposes. This is because the joint tenants do not occupy or pay rent in relation to only part of the dwelling. While the tenants may decide to assign rooms to themselves and pay different contributions to the rent, legally and under the terms of their tenancy agreement, they are all entitled to occupy the whole of the house and are all liable for the whole rent. This issue was dealt with in some detail in the case of R(on the application of Goremsandu) v Harrow London Borough Council [2010] EWHC 173 (Admin) and the High Court made clear that the tenancy agreement was the main arbiter of the type of tenancy held. As the HMO test was not satisfied in this case the owner was not automatically liable and the residents were liable to pay council tax.

2. Five individuals occupy bedsits under individual tenancy agreements. Each bedsit has its own en-suite and kitchenette and the rooms are banded individually. Provided the VOA’s decision to band the bedsits separately is correct, again, the landlord is unlikely to be liable to pay council tax in this scenario. This is because the individual bedsits are each chargeable dwellings in their own right and provided the bedsits are occupied by one tenant and have not been adapted for occupation by more than one household, they will not satisfy the HMO test. The individual residents will usually be liable to pay council tax on their own bedsit.

3. Two individuals share a two-bedroom flat. Each tenant has a separate tenancy agreement for their allocated room and is solely liable for the rent for the room. The individuals share the kitchen and the bathroom. The flat as a whole is banded as one dwelling. This flat cannot be an HMO under the Housing Act 2004 as there are only 2 occupiers. However, it could be an HMO for council tax purposes because each person who lives in the dwelling is only able to occupy part of the dwelling. Both tenants have exclusive possession of their bedrooms and are unable to enter the bedroom of the other tenant. In this situation the flat is likely to be an HMO for council tax purposes and the landlord would be liable to pay council tax.Even if the landlord is liable to pay council tax under the regulations, you may still not need to pay if there are council tax exemptions or the tenancy agreement states otherwise. These further factors are addressed in part 3 of this blog series.

Please click here to read my previous blog.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*