By Mike Edwards.
A further significant issue in relation to excluded areas arises in relation to Council Tax (CT) and the definition of a House in Multiple Occupancy (HMO) for CT purposes as opposed to the other two HMO definitions in relation to Planning and then in The Housing Act 2004. Yes there really are three HMO definitions in existence and more importantly and as evidenced by this example below, in use.
Definitions.
In simple terms the CT definition of an HMO is that if a tenant renting with others does not rent the whole of a dwelling with those other tenants then it is an HMO for CT purposes. This is extremely significant and important as it means that if you let a two bed house to two different people each with a tenancy of their own bedroom and with a licence to occupy the common parts (hall, stairs, landing, bathroom and kitchen), you would create a ‘Council Tax HMO’
Many agents and Landlords use what is called a hybrid sharer’s AST in multiple occupier tenancies, granting a separate agreement to each occupier. The alternative is of course to have all the sharers on a single agreement, and there are pros and cons in both approaches.
The point is if the sharers are not sharers in the true sense of the word – friends needing to find accommodation (typically second year onwards students, for example) – and prepared to rely on each other in a joint tenancy scenario, then the landlord may have little choice if the sharing tenant or their Guarantors are not prepared to sign a single agreement.
This is usually not a problem in such situations because there can be only one CT bill and so the Landlord retains that in their name and reflects the costs in the rent. But what if the tenants are all on one single agreement – true sharers – but are excluded for some reason from some part of the property. They would not have access to the whole of the dwelling and thus the Council Tax office would deem it an HMO and turn to the Landlord for the Council Tax – including back payments if the tenants have not paid it.
And as the CT liability had not been reflected in increased rent the Landlord could not recover the costs against the tenants.
Case History.
This was the case in Goremsandu v Harrow LBC where three individuals were named on one furnished tenancy agreement but didn’t want some of the furniture so asked if it could be stored in the conservatory, the loss of use of which the tenants were not worried about. But when Harrow LBC learned of this arrangement they claimed as the tenants did not have use of the conservatory and in effect were excluded from using it because the Landlord was using it to store his furniture they decided the Landlord was liable for the Council Tax.
A silly proposition by Harrow but at the first hearing the Landlord lost and had to appeal and eventually won.
So please beware!
But as evidenced in the last article on this subject it is not uncommon for a Landlord to retain part of a property for their own use – garage, basement, attic – and clearly this creates the same danger and as in this case the landlord could be held liable for the Council Tax. Not a problem if the potential liability is recognised and reflected in the tenancy agreement from the outset.
However if as in this case the liability occurs after commencement of the agreement it could result in a significant bill and no opportunity to recover the costs from the tenant.
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