I may have to sell after Council Tax reassessment increase of £100pm per room?

I may have to sell after Council Tax reassessment increase of £100pm per room?

11:30 AM, 27th March 2017, About 5 years ago 42

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I have 5 large properties in Aberdeen which I let out room by room to long and short term professionals.

I pay the council tax bill and all utilities and then charge the tenant a flat monthly rent.

However, I’ve just been informed by the Grampian Assessors office, that EACH BEDROOM will now be classed as an individual property entered on the valuation roll even though the rooms are not self contained (the showers/kitchens are shared) and as a result will be all subject to Band A council tax.

This means and extra £100 per month per room costs. I have 40 rooms!

Unfortunately, the market wont stand a rent rise of £100 per month per room (the average rent I charge is £425) and I can’t carry that amount so I’ll probably have to sell up.

It seems a bit strange that the Valuation roll will be changed to show 40 properties which clearly there are only 5.

Isn’t this a huge distortion of any city’s valuation roll?

Is there any other landlord facing the same situation?

Many thanks

Karen



Comments

by Tobias Nightingale

10:38 AM, 28th March 2017, About 5 years ago

Reply to the comment left by "Robert Mellors" at "27/03/2017 - 20:38":

That clears a lot up, thanks! However I would think if it was a joint tenancy would it not be the 'lead tenant' that would be responsible to pay for the council tax/utilities? But what if said tenant is on benefits and in a hmo? As far as I know said tenant would have to claim the room amount which would be hard if the tenancy cites the total rent rather than individual amount. I may be wrong but would stating the address on the tenancy but not citing a room number also fix said issue? Or am i being stupid and missing something that should hit me in the face lmao.

by Karen

9:06 AM, 29th March 2017, About 5 years ago

Reply to the comment left by "Robert Mellors" at "27/03/2017 - 23:51":

Hi Robert
Ive found your advice really useful. Thank you.
I did a bit more research and I've informed the assessor that I'll run them as guest houses and apply business rates for the properties, but strictly no breakfasts and a lot more work for my cleaners!
Hopefully that'll stop the individual council tax bills going out next week. The other properties can be let out as whole properties retaining the whole house council tax.
The down side is that renting out whole properties removes a number of individual good value, quality rooms from the market for individuals on a budget.
Thanks again
Karen

by Robert Mellors

9:58 AM, 29th March 2017, About 5 years ago

Reply to the comment left by "Tobias Nightingale" at "28/03/2017 - 10:38":

Hi Tobias

At the moment I have a couple of properties which I let out as whole house joint ASTs, one has four joint tenants, the other has 2 joint tenants. None of the tenants are related to each other, and they have come into those properties at different dates, so I simply issue a new AST whenever a tenant leaves and a new tenant move in. The AST's just state the whole house rent (i.e. it is just one address, room numbers are not mentioned as part of the address as the tenants are free to swap and change rooms as they agree amongst themselves), the ASTs do not specify which tenant should sleep in which room. As such, the whole house rent is "apportioned" to each tenant by the Council so that they assume each tenant has to pay their share of the total whole house rent. - This is not strictly the legal position as it is joint and several liability, but apportionment is how Councils come up with the figures upon which to do their calculations of each tenant's HB entitlement.

In the 2 bed property both tenants are on HB, and claim separately, so the the HB is awarded based on the total rent divided by two (the whole house rent is approximately 2 x the LHA rate for a room in a shared house). One tenant has their HB paid direct to me, the other has it paid to them and it is then paid to me. The Council Tax bill is sent direct to the joint tenants, and they are jointly liable for paying it, but how they organise this between themselves is up to them, it is their bill and their liability.

In the house let to four joint tenants, again it is just one address, one AST, and one whole house rent. The rent is set based on the nearest comparable (in terms of how the house is used), i.e. it would not be appropriate to price the rent based on a letting to a single family household, as the wear and tear, maintenance, management costs, risks, etc, are not the same, so instead the rent is set based on 4 x single room rental rates (as that is a much fairer comparison). Initially, the Council refused this because that meant that the house was let at much more than the similar sized houses that were family lets, but after a very long awaited appeal decision, the Council have accepted this reasoning and are backdating the HB entitlement to the start of the tenancy. In relation to the Council Tax for this particular property, the Council have billed just one of the four tenants, but I have only just been told this by the tenant, so last week we assisted her to appeal against this. (I imagine it will be many months before the Council revise their decision, but in light of the success with the HB appeal, and how it has been done with other joint AST properties, I do expect the Council Tax to eventually be apportioned between all the joint tenants).

by Robert Mellors

10:27 AM, 29th March 2017, About 5 years ago

Reply to the comment left by "Karen McKee" at "29/03/2017 - 09:06":

Hi Karen

I'm glad that my comments/suggestions have been of use, but as always it is with the proviso that you should seek your own independent legal advice (as I am not legally qualified, and I'm also basing my experiences on situations in England, which may differ from Scotland).

In relation to running your properties as a guest house, (assuming no planning restrictions barring it being a guest house, and the application of business rates is favourable compared to Council Tax, etc), if you market your property to the client groups you want, then you will not stop other client groups applying to come to the guest house, but you will find that you mainly get the client groups that you actually want, and of course you have ultimate say over whether you let to any particular individual anyway.

I'm not sure why you feel you can't let out all of the properties as "guest houses", and provide cleaning and laundry facilities etc, if that is the model that works well for you. Nevertheless you can let the properties as whole houses but to groups of individuals as joint tenants if you wish (as explained to Tobias, above), in which case there is no loss of "individual good value, quality rooms from the market for individuals on a budget", it would just be done on the basis of individuals becoming part of a joint tenancy instead of having individual room tenancies. This overcomes the problem of each room being given a separate Council Tax bill, and instead the joint tenants will receive the Council Tax bill (but there is nothing to stop them giving that to you to pay for them).

by Karen

16:57 PM, 29th March 2017, About 5 years ago

Reply to the comment left by "Robert Mellors" at "29/03/2017 - 10:27":

Hello again Robert
I've run it by my solicitor and it's ok.
The 2 big properties already have guest house consent and I'd switch to business rates instead of council tax. The other 3 are residential and would require a 'change of use' via the planning department.
I think I'll be letting the 3 smaller ones to students on 1 x AST (all HMO) who don't pay council tax and the 2 big properties will get 100% small business relief on business rates.
The irony is that they wanted to increase the CT to £4000pm, my original council tax bill for the 5 properties was approximately £1000pm. If all now goes to plan, then this will reduce to zero thus they loose the original £1000pm I had been paying for years. Where's the sense in that?

Karen

by Robert Mellors

17:16 PM, 29th March 2017, About 5 years ago

Reply to the comment left by "Karen McKee" at "29/03/2017 - 16:57":

Hi Karen

So glad that I've had any input into helping to resolve your problem (as per the original post), and hopefully your experience will assist other landlords facing similar problems in the future.

Councils can be extremely stupid at times, they don't work on common sense or logic, they just interpret the rules (often incorrectly) and then apply their interpretation of the rules to the detriment of all concerned (including themselves). This is a prime example, they will now be £12,000 per year worse off. Like you say, where's the sense in that?

by Robert Mellors

17:26 PM, 29th March 2017, About 5 years ago

Reply to the comment left by "Karen McKee" at "29/03/2017 - 16:57":

Plus of course, if there is a serious homelessness problem in your town, you could offer to let the Council rent rooms off you to house the homeless, and you could charge the Council the local Travelodge rate (or maybe just below that rate, e.g. £40 per night = £1200 pcm). Where the Council are housing the homeless in emergency accommodation, it is done via you invoicing the Council's homelessness department, NOT via any Housing Benefit claims or other nonsense.
- I imagine you don't want to go down that route, BUT it does provide another option for you if needed. (then you have the irony of the Council paying you, instead of charging you).

by Tobias Nightingale

10:41 AM, 30th March 2017, About 5 years ago

Reply to the comment left by "Robert Mellors" at "29/03/2017 - 09:58":

Hi Robert,
Thanks for your detailed response. A last question.For the sake of argument lets say a council has banded each room as described in this post, if the LL was to switch to a 'joint' tenancy would that fix the issue? Ie Is the decision reversible? Or once done would it be permanent?

by Karen

11:02 AM, 30th March 2017, About 5 years ago

Reply to the comment left by "Robert Mellors" at "29/03/2017 - 17:26":

Hello Robert
That's a bit too scary for me, but I'm astonished at the sums involved.
Thanks again
Karen

by Robert Mellors

11:23 AM, 30th March 2017, About 5 years ago

Reply to the comment left by "Tobias Nightingale" at "30/03/2017 - 10:41":

Hi Tobias

If the council has already assigned each room with a separate Council Tax account then I would appeal against this, and if all the rooms are the same address and all let as a whole house, e.g. a joint tenancy, then this would be very strong evidence to support the contention that it is just one rateable property (whole house).

All decisions are reversible, but it may only apply from the point at which those conditions are met.


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