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


Readers Question - Published on 16/05/2017
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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

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Comments

  • Reply to the comment left by “CouncilTaxGuy ” at “18/05/2017 – 07:30“:

    Hi Craig
    I don’t know how these websites work but the first quote of mine you used was the one before I edited the message. However there was very little difference but I’m left wondering if the unedited version goes to email as on my emails you have said on your 7.30 post, ‘The main issue I used to see (I worked in the council tax recovery for a decade) was….’ but this does not appear on your 7.30 post and was possibly edited out?

    If you have worked for the Council Tax department then that explains a lot. However Councils don’t decide the law, the Courts do (much to Trumps cost). If you look on Mandy’s link and go on the first blog ‘How do I determine whether my property is an HMO for council tax purposes’ then you will see the case of Goremsanda and The London Borough of Harrow. Whatever the Council may try or do, when push comes to shove the Courts will determine issues.

    I once had Council Tax put on one of my houses because the tenants I had where in their third year and ceased to become students for the last six weeks of the tenancy. I only knew about it because they asked me for advice. I told them to keep arguing and eventually the Council backed down. It’s interesting that the Council billed them and not me! My son when he was a student living with one sharer who worked was taken to court for non payment. He was living in a house which clearly could have been classed as a HMO as it was after 2004, but it was the tenants taken to Court and not the landlord.

    Councils in my experience go well beyond their rights. Twenty five years ago my Council tried to bankrupt me by requiring me to carry out, what eventually (proved by experts) where unnecessary building works and all the fire precautions a HMO may require. I took them to the County Court and had to go as ‘litigant in person’ due to the expense. To cut a very long story short after a year of waiting for a court hearing they told me to make my own agreement which they would sign and reimburse my expenses. At least the definition which was ‘single household’ and changed in 2004 to ‘unrelated’ made things clearer.


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  • CouncilTaxGuy Member Profile Deleted says:

    I believe an email goes out as soon as a post is submitted and doesn’t reflect any changes made after that.

    I have never said that the council could do as they wish, they need to follow the legislation but there is often more than one reading of the legislation and the council are required to make a decision on the facts as they see them. The system is set to allow appeals in these case, where required.

    Goremsandu and The London Borough of Harrow was a specific case which doesn’t crop up very often- the tenants were found to have rented the whole property as the conservatory wasn’t excluded, they only allowed the landlord to continue to use it. If they had an agreement which had specifically rented the property less the conservatory then it would have a HMO as they did not then rent the whole property (as per part b of the Class C property definition). Like everything else in legislation the council had their reading and the landlord had their reading, as is both their own rights. If the law was perefectly clear we wouldn’t need lawyers to argue cases.

    The valuation tribunal (wrongly in my opinion – and ultimately in the High Courts as well) read the legislation the same way as the council and the appeal to the high court was made for a final verdict – the court was likely to always come out on one side or the other and found for the landlord. They could have found for the council but decided not to, this is how the system was designed to work in a dispute and it did so nicely.

    The local authority are quite right to remove the exemption if the occupiers of your property ceased to be students as the the exemption was no longer applicable if all occupiers were no-longer full time students, even if only 6 weeks before the end of the tenancy. Attributing the liability correctly is a further issue but that was independent of the exemption issue.

    Any changes in the Housing Act 2004 for HMO’s are separate of council tax – council tax has always had it’s own definition of a HMO and this doesn’t always have to match up with a HMO for licensing/planning purposes. Without knowing the exact information the council had the specific case cannot be commented on in depth.

    Craig


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  • Reply to the comment left by “CouncilTaxGuy ” at “18/05/2017 – 13:30“:

    If the case in the high courts was won by the landlord then whatever your view right or wrong then that’s the ultimate authority every one has to look to. It is clear in a shared tenancy even though it had problems arising from the conservatory that the council cannot make this a HMO for council tax purposes. In fact the problem of the conservatory and any arising doubts strengthen the case in my eyes.

    There are loads of sites including the one posted by Mandy, supporting my argument. Are they wrong in your view? Are they fake info!

    My concern is for Josh and if he believes you in your opinion that councils can make landlords liable for CT even in a shared lease. And consequently does not give himself a fair chance to even begin to get himself out of a difficult situation.

    If I where Josh I would weigh up the odds financially and get legal advice to see if his clause of admitting liability for council tax could be overturned by the deception of his tenants claiming to be students, if the info. they provided at the start of the tenancy, could prove deception.


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  • The landlord may be liable for Council Tax even in a ‘shared lease’, Craig very clearly quoted the law that states it.

    This may be what the council relies on to deem the property a HMO for council tax purposes. What Craig is saying is that this should therefore be checked and then, as the case may be, it should be shown to the council that this isn’t in fact the case.

    Liability for council tax is set in law. The tenancy agreement cannot change the position.

    The only thing the tenancy agreement can do is make one party liable to reimburse the other.


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  • Reply to the comment left by “Romain Garcin” at “19/05/2017 – 09:25“:

    The ‘law’ is not determined by the Council but by the High Court. Any Council trying to go beyond this will run the risk of being taken to Court and very likely losing if a precedent has been set.

    I will try the link to my Council at Oxford and just in case it fails to go through properly then the relevant parts are:-

    ‘The tenant (or tenants) is responsible to Council tax when you rent the whole property to one person or family, or to joint tenants. We send the bill to your tenant(s)’

    ‘If you rent out the property to several people, and they each have an individual tenancy agreement to occupy only part of the building called a ‘house in multiple occupation’ (HMO) you are responsible for paying the Council tax. We send you the bill.’

    https://www.oxford.gov.uk/info/20165/council_tax_information_for_landlords/160/landlord_responsibilities_for_council_tax


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  • The law is primarily determined by Parliament and the government.

    What Craig quoted is the exact wording of the relevant statutory instrument that defines special cases pursuant to an Act of Parliament.

    It is therefore beyond argument.

    The precedents quoted here do not correspond to the same scenario.

    This is a rare scenario and most websites focuses on common cases and don’t go through the law in minute details.


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  • Reply to the comment left by “Romain Garcin” at “19/05/2017 – 12:29“:

    So you are seriously telling me the guild lines on Oxfords council’s website is incorrect and like other websites ‘don’t go into the law in minute detail’ and the high court judgement in the case of Goremsandu and the London Borough of Harrow count for nothing. I’ve had two large HMO’s for nearly forty years and have seen many changes, even the poll tax!. The council treat me along the guild lines of their website. They open accounts for my tenants and bill them with an exempt notification in September and again in April, the beginning of the financial year. When once the council tried to bill the tenants when one group failed to be students for the last six weeks of their tenancy they billed them and I only knew about it because they asked for my advice. Was I really expect to pay a bill in their name?

    There was a time when utility bills were the responsibility of the landlord if the tenants failed to pay. There was endless publicity given to landlords who got caught in this trap. As you must know this is no longer the case. I don’t see endless publicity of landlords caught in this trap with council tax, although this point is a sideline.

    I can only think that somewhere along the lines this point between Craig and now you has developed crossed wires. If what you are saying is right then Josh has no hope of getting around his council tax problems, but if I’m right he has (right that is in practise). I’m only out to help Josh and I firmly believe I am right in practise, which would give him some chance.


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  • Thanks all, having read all of the comments I am a little confused to the say the least. The council (Charnwood Borough Council) are not being at all helpful and are simply stating that because the property is a HMO (3 or more unrelated individuals) and the council tax account is in my name not the tenants, I am liable for the council tax, end of story.

    The 3 tenants are however under a single tenancy agreement so I am not sure if this actually means they are responsible for the council tax and this overrides any clause in the tenancy agreement which says otherwise. What do people suggest as a way of taking this further with the tenants. As far as they are concerned they believe the tenancy agreement means they are free from any council tax responsibility.

    Josh


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  • Craig had put you on the right track but it seems that this was lost along the way.

    What matters is the definition of HMO for council tax purposes, i.e. Class C, which definition was also given by Craig.

    You would therefore need to get back to the council along those lines and to explain that your property does not match those conditions.

    But if your tenancy agreement states that you are liable for council tax then you have to refund the tenant for any council tax they may be liable for. So in the end it may not make a difference for you to convince the council that your tenants are liable.


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  • I presume you have paid the council tax on the tenancy ending July this year? Your last sentence says ending 2016 which I presume is a mistake. I presume you wish to know whether or whether not you should have been billed and if not if you have a good case to claim back from your tenants and to clarify it for future tenancies. Your lease obviously complicated things when you made yourself liable on the lease and I think you need some legal advice if that’s financially worthwhile. But the issue as to whether your council accept you are not liable for CT under a shared lease is another question which needs solving before you can proceed further.

    You have not said if you have or require a license which in some areas is now down to three or more but I believe The Environmental Health who issue Licenses and the council tax department work on different rules. EH since 2004 work on ‘unrelated tenants’ and the council tax as far as I can see work on the benchmark EH used before 2004 which is ‘households’. If the council have told you you are a HMO then they may be referring to the guidelines of EH and not the council tax department. If you click on to the link and go through ‘Council Tax for flats.bedsits and shared houses’ highlighted in red:-

    http://www.charnwood.gov.uk/pages/whoisliabletopaycounciltax

    They state council tax is the responsibility of the landlord ‘where the dwelling has been adapted for more than one household’. However if your shared tenancy forms only one household you are clearly not liable as a landlord. A definition of one household or single household is:-

    http://www.gov.uk/guidance/definitions-of-general-housing-terms

    A shared tenancy can fairly easily be a single household. Let to a group who all ready know each other, only one total rent, even unlocked doors etc. I took my EH council department to court over whether or whether not I was a HMO twenty five years ago because the benchmark at that time was ‘single household’. It was agreed I was not a HMO. Although the benchmark for HMO’s was changed for the EH department it looks as if for council tax departments it has not

    As I have also said in an earlier post my council tax bills for my shared tenancies are in the name of the tenants. You do have to inform them of the change over of tenancies otherwise they will bill you. They billed me once when I failed to inform them and when I did inform them they were perfectly happy to bill the tenants. I’m sure that if I was liable they would bill me in the first instance and if they where students I would have to provide the proof which I gathered from my tenants. But it simply does not work like that and my tenants have to work with the council directly.

    You have clearly been dealt a raw deal from these tenants. May I wish you good luck with dealing with all this.


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