Can I change the tenancy terms after finding out tenants are not students and paying Council Tax?

by Readers Question

7 months ago

Can I change the tenancy terms after finding out tenants are not students and paying Council Tax?

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Can I change the tenancy terms after finding out tenants are not students and paying Council Tax?

I own a 3 bed flat which I rent out to University students on a single 12 month AST (the tenancy agreement asks for each person’s student id and place of study). On this basis the agreement states that council tax (along with other utilities) is the ‘Landlord’s responsibility’ as the property will be exempt from council tax provided all 3 tenants are full time students for the duration of the tenancy agreement.

This has never caused a problem as each year the different tenants have been given the exemption by the council. However for this year (the tenancy agreement runs from 25th July ’16 – 24th July ’17) I was notified only half through the tenancy agreement that not all 3 tenants were students, in fact only one of them was a part time student, one other did not start their course at all and the final one graduated in December.

None of this was made clear to me as the landlord until well into their tenancy agreement. Therefore the property is no longer exempt from council tax and as it is classed as a HMO from the Local Authority this liability falls on me as the landlord.

Obviously with the property and tenancy agreement being aimed specifically at students I have not factored in the cost of council tax into their rent. I have therefore had to foot the cost of the council tax for the duration of their tenancy agreement whilst asking them to reimburse me this cost (and to no avail at present).

Bearing in mind that the wording of the tenancy agreement is not ideal (there is no mention of notifying the landlord of change of circumstances and no longer being students), is there any way I could pass this cost onto the tenants e.g. amending the contract in light of their change of the status to non-students and increasing the rent due or deducting an amount from their deposits?

It is also worth mentioning that they have now paid in full for the whole tenancy period (ending 24th July 2016).

Josh

Comments

terry sullivan

7 months ago

any guarantors?

Mandy Thomson

7 months ago

Hi Josh

Does the agreement actually state that "the property will be exempt from council tax provided all 3 tenants are full time students for the duration of the tenancy agreement" (or words to that effect)? Also, do you have written evidence (even if only a text message) of their non student status?

Josh Ellicock

7 months ago

Reply to the comment left by "Mandy Thomson" at "17/05/2017 - 13:04":

Hi Mandy, unfortunately the tenancy agreement just states,

"The following outgoings on the property are the Landlord’s responsibility... Council tax".

The only mention of their student status is in the schedule where it asks for their university course and student id number.

Ian Narbeth

7 months ago

I am afraid it is down to your due diligence. Unless the tenants represented that they were students and warranted that they would remain so, I doubt you have a claim. Who drew up the tenancy? They have done a possibly negligent job because even if the letting was to students the tenancy should have made the tenants liable for Council Tax or at least required each student to reimburse a percentage of the tax. No skin off their nose as they could claim the exemption as students.

I am puzzled by your HMO comment. Surely the educational status of the tenants does not affect whether the house is an HMO?

I think in future you need to increase your rent to cover the Council Tax.

Mandy Thomson

7 months ago

Reply to the comment left by "Josh Ellicock" at "17/05/2017 - 13:29":

If the agreement doesn't qualify the landlord's CT responsibility in any way (are you sure there isn't anything hidden in the clauses?) or there is no other document to qualify the terms under which the landlord will pay CT etc which the tenants and any guarantors have also signed and agreed to, the tenants can't be held liable.

If the agreement had provided for rent increases during the fixed term, you might have been able to recover at least some of your money that way, but it's unlikely a typical student let AST would contain such a clause.

As these tenants are not students, they may wish to remain after the end of the fixed term, at which point I would issue them with a section 13 notice increasing the rent by as much as is allowable to recover your money on a monthly basis plus the continuing additional expenses (note the increase can't exceed the market rate or the tenants can take you to a property tribunal and challenge the increase).

Just in case you need to serve section 21 either for the end of the fixed term, or once the tenancy becomes statutory periodic once the fixed term ends, ensure that not only has the deposit legislation been complied with, but serve hard copies of the following on the tenants (you need only serve one copy of each between them):

- Government How to Rent Guide
- Current gas safety certificate

and, if they should take responsibility for the utilities, the energy performance certificate (can be downloaded from https://www.epcregister.com/reportSearchAddressTerms.html?redirect=reportSearchAddressByPostcode )

It's important you retain evidence the tenants received these - postage certificate, other proof of postage, signature or witness statement. The tenants must be given these well before any section 21 is served on them.

7 months ago

The problem you've always had is that - regardless of the tenant's status - if the property is a council tax HMO then the landlord is always liable (regardless of whether any charge is actually due) as per legislation and thus, from that side of it, any risk is always on the landlord. You can't put anything in an agreement which alters how the local authority will issue demand notices and determine liability etc (well, you can, but it will have no effect).

Any mitigation of the Council Tax charge on a HMO always has to come via an agreement with the residents to cover any costs which may be due. If there isn't any agreement then you may well have to simply foot the charge and make sure you get covered next time.

Craig

7 months ago

Reply to the comment left by "Ian Narbeth" at "17/05/2017 - 13:52":

"I am puzzled by your HMO comment. Surely the educational status of the tenants does not affect whether the house is an HMO? "

It doesn't, as far as Council Tax HMO's are concerned.

The education status does of course affect the Council Tax charge due, but that is a different matter.

Craig

Josh Ellicock

7 months ago

Reply to the comment left by "CouncilTaxGuy " at "17/05/2017 - 15:40":

Thanks for the comments everyone, as I expected there is not a lot I can do given the lack of specific reference to 'council tax/ student status changing' in the agreement.

It seems the only way I can cover any potential for council tax charges being owed in the future is to add a clause in the agreement where should the tenant's student status no longer stand, this will result in an increase in the rental amount owed?

Ian Narbeth

7 months ago

Hi Josh
"It seems the only way I can cover any potential for council tax charges being owed in the future is to add a clause in the agreement where should the tenant’s student status no longer stand, this will result in an increase in the rental amount owed?"

That does not quite do it. If any of the tenants is not a student then the whole house is liable for Council Tax. You need to think this through and make sure ALL the tenants understand that if ANY of them cease to be students they ALL have to pay extra to reimburse you for the Council Tax. This will only be acceptable to them if they are on a single joint tenancy.

Mandy Thomson

7 months ago

Reply to the comment left by "Josh Ellicock" at "17/05/2017 - 16:03":

As it's a small HMO, if you put the tenants all on one joint AST any council tax payable and the utilities would normally be the tenants' responsibility unless you agree otherwise. If you give them separate ASTs, then you as the landlord are responsible at least for council tax. In either case, if all the occupants are full time students no council tax is payable. If some of the occupants are full time students, those people are disregarded.

In future, if you issue a joint AST this should be non issue as the tenant is usually responsible for CT and bills anyway (just leave the AST as the default - tenant responsible for CT and bills). If you issue separate ASTs, put in a clause stating any change in circumstance, such as ceasing to be a full time student, must be notified to the landlord, and the tenant will indemnify the landlord against any council tax the he pays on the tenant's behalf.

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