Council Tax Liability for “Houses in Multiple Occupation”

Shakespeare (well, Juliet) famously said that;

“What’s in a name? that which we call a rose
By any other name would smell as sweet.”

A recent case I dealt with suggests in fact some names, or statutory definitions, do make a considerable difference!

The Facts

My client let a house out on two separate tenancies to two individuals; this is a common situation where individuals “house share” rather than having an assigned and identified room in the house. The tenancy agreements stated that the tenants were responsible for paying the Council Tax on the property. My client was surprised, therefore, when he received a Summons for unpaid Council Tax for the property on the basis that his property was a “House in Multiple Occupation” (“HMO”).

What is a “HMO”?

My client, a very sensible chap, looked online for some information on HMOs and immediately found the official government website (https://www.gov.uk/private-renting/houses-in-multiple-occupation) says that

  • “Your home is a house in multiple occupation … if both of the following apply:
  • at least 3 tenants live there, forming more than 1 household
    you share toilet, bathroom or kitchen facilities with other tenants”

(a definition derived from the Housing Act 2004, section 254).

The owner of a HMO (rather than the tenants) is responsible for the Council Tax on the property and, in addition, owners and managers of HMOs are under a variety of, sometimes quite onerous, obligations especially if there are more than five tenants and/or the property falls within a “selective licensing area” designated by a local authority which can create issues for relatively small-scale landlords (including my client) so they have a considerable vested interest in ensuring their property does not come within the statutory definition of a HMO. If a property is not a HMO then (usually) the tenants would be responsible for the Council Tax.

My client was therefore satisfied that he clearly didn’t have an HMO, because there were only two tenants, and an HMO needs to have “at least 3”, but in the face of the Council’s demand (and being a sensible chap) he thought he should get further advice and so he came to see me in conference.

HMOs and Council Tax

Despite the apparently clear statement of the definition of an HMO on the government website, in fact different considerations apply when considering liability for Council Tax because the Council Tax (Liability for Owners) Regulations 1992 provides that;

Regulation 2

“a dwelling which … (b) is inhabited by a person who, or

each of whom … is a tenant of, or has a licence to occupy, part only of the dwelling” (my emphasis),

should be considered to be a “House in Multiple Occupation” for the purposes of Council Tax liability, and the owner of the property (rather than the tenants) is liable to pay the Council Tax for the property.

The effect is that, for Council tax purposes, you can have a HMO with only one tenant! There are numerous cases where Council Tax liability for a property shifts from the tenant(s) to the owner and back depending on the number of tenants in occupation and the basis of their occupation at any given time!

The Implications

Often the rent being charged from the individual tenants for the property is set on the basis of the housing benefit which is payable for the property (and recognising that the tenant is dependent on benefits) and there is, realistically, no scope for simply adding the landlord’s Council Tax liability to the tenants’ rent.

Similarly, any terms in the tenancy agreement indicating that the individual tenant is responsible for Council Tax is likely to be worthless because the tenant does not have the wherewithal to make the payment or sufficient assets to make a contractual claim worthwhile.

The answer would be for there to be a single tenancy of the property to the two individuals (in which case the tenancy could require them to pay the Council tax) but the housing benefit would not cover the cost of the whole property and the landlord would be in difficulties if one tenant left.

My client, reluctantly, paid the Council Tax (thereby saving himself further legal costs and a trip to Court) and clearly appreciates that free advice, especially from the internet, is often worth exactly what you paid!

Professional legal advice is available from a range of sources e.g. from an expert barrister under the Direct Access scheme or a solicitor or the Citizens’ Advice Bureaux.

Becket Chambers have a number of barristers who accept instructions under the Direct Access Scheme.