26th October, 2019
Although I spend a large part of my time dealing with Housing Benefit and Universal Credit queries and disputes, occasionally, I assist clients challenge Council Tax demands. Invariably, I’m able to resolve disputes with the Council concerned, but, on occasions, need to pursue the issue to a Valuation Tribunal (VT). Resida Property Services, is one such client, who were forced by Doncaster MBC, to pursue matters to the VT. The issue under discussion, was whether the Council was entitled to transfer Council Tax liability to the landlord, from the tenants, on the basis the property (3-bedroom, end terrace) was being operated as an HMO or should the liability rest with the Joint Tenants in accordance with their AST agreement.
Ordinarily, liability is determined by who occupies the property, but Councils are permitted by the Council Tax (Liability for Owners) Regulations 1992 SI 1992/551 to make the landlord liable, where the property is being operated as an HMO. For the purposes of Council Tax an HMO is defined as:
Class C: Houses in Multiple Occupation
- a) was originally constructed or subsequently adapted for occupation by persons
who do not constitute a single household; or,
- b) is inhabited by a person who, or two or more persons each of whom either –
(i) is a tenant of, or has a licence to occupy, part only of the
(ii) has a licence to occupy but is not liable (whether alone or
jointly with other persons) to pay rent or a licence fee in respect of the dwelling as a whole.
The disputed accommodation had, in fact, been used as an HMO up to 13th September 2015, at which point, two of the occupiers approached RPS, with a view to securing a joint tenancy, with a third person. Their intention was to operate the property as a common household, with each JT agreeing to share the cost of the Rent, council tax, utilities and household chores, including washing, cooking etc. and sharing the lounge, just as most families do. In doing so, they were hoping to bring some stability to their lives and avoid, having repeatedly, to share accommodation with strangers who lived transient lifestyles.
Cause of dispute
RPS agreed, and the arrangement worked well for 4 years, until Doncaster MBC decided it wasn’t happy with the arrangement. It discovered a son of one of the JTs had resided there for a period of a few months. On further investigation, the Council found locks on the bedroom doors, although it accepted, they were all open at the time of its visit to the property. One of the residents had also failed to apply for his Council Tax Reduction (CTR) resulting in a charge being applied, that hadn’t been paid. Apparently, when pursued for payment, he had allegedly claimed that he was effectively living in an HMO, although when questioned later by RPS denied this.
In support of its position, the Council cited an unreported Court of Appeal case (The UHU Property Trust v Lincoln Council, (2000). In the UHA case, the court determined:
- The VT that determined the case was entitled to look beyond what was stated and agreed to in the AST agreement; and
- Based on the evidence, it was entitled to conclude, the various occupants of the property were in fact, operating as an HMO as each claimed they were only liable for their share of the rent; each had exclusive rights to a bedroom; when they applied for HB they quoted only their share of the rent; when one left, the landlord reduced the liability of the remaining residents to a figure based on multiples of the Shared Accommodation rate of HB; the Property Trust also admitted to having failed to pursue the remaining residents for the rental debt on a joint & several liability basis.
Resida Property Services response
In contrast, each of the three joint tenants, were named on the agreement; the terms of the agreement made clear, they were jointly & severally liable for the full rent; none of them had “exclusive rights” to only part of the property; as well as the rent, the AST made clear they were liable for the council tax and utilities; when they applied for HB or UC “housing costs” they quoted the full rental charge, not an apportioned share of this.
Tribunal’s Decision and Reasoning
It concluded: “The billing authority was holding the appellant liable for the council tax under Class C (b) (i) and (ii) of the above regulations, as the rooms had locks on the doors and had argued, the tenants were not liable to pay the rent in respect of the dwelling as a whole. Whereas, the landlord had stated, that whilst the rooms have locks on the doors, these had been installed when the property was rented as individual rooms (up to September 2015) and the locks remained on the doors should the property revert back to being rented as individual rooms in the future. Ms Burns, Director of RPS, had also stated – “that the tenants do not have the keys to the rooms and therefore the locks are not used.”
Mr Irvine contended – “the tenancy agreements RPS issued for the appeal property were joint tenancies, not individual tenancy agreements. The landlord would pursue the tenants for any shortfall in the rent, in accordance with the terms of the agreement. But as RPS received payment of the housing costs for each JT direct from Universal Credit this effectively covered most, if not all of the rent, so the tenants’ joint and severally liable for the rent had not caused an issue for the tenants or landlord.
The VT added – “In support of his argument, Mr Irvine relied on the Goremsandu vs LB of Harrow judgement. In this judgement, the High Court decided, the Valuation Tribunal had erred by applying the wrong test in concluding that individual rent charges gave rise to “multiple occupation”. The statutory test was whether the rent charges gave rise to a licence, whereby the tenants occupied or paid for part only of the dwelling. The court found that the individual rent charges still allowed each tenant to occupy the whole property……………..Mr Irvine stated the tenants in RPS’s case had no exclusive rights to their own room. The JTs could each access the entire property and the terms of their tenancy agreement proved that all three were jointly liable for the rent for the whole property” and had demonstrated over 4 years that this arrangement was working in accordance with terms of AST.
The VT concluded by stating – “Given the foregoing, it was clear to the panel that the billing authority was incorrect in holding the appellant liable for the council tax under Class C (b) (i) and (ii) of the Council Tax (Liability for Owners) Regulations 1992. Whilst there were locks on the bedroom doors, there was no evidence presented to the panel to prove that the locks were used and Mr M (one of the JTs) had confirmed that he did share all the facilities in the appeal property with the other tenants. Furthermore, the tenancy agreements provided to the panel proved that the tenants were jointly liable to pay the rent for the property, as a whole. In accordance with the Goremsandu judgement, the statutory test was whether the rent charges gave rise to a licence whereby the tenants occupied or paid for part only of the dwelling. In this appeal, it was clear that the tenants did have a joint tenancy agreement. From Mr Irvine’s and owner’s verbal evidence, it was clear to the panel, that the tenants were jointly liable for the rent for the whole property. It therefore concluded that the appeal property was not a HMO from 11 June 2018″.
The Council, as a result of the VT’s decision, must now correct its mistake by transferring liability back to the JTs. It has already been in touch with each of the three and plans to award Council Tax Reduction (rebate) retrospectively, using the information from earlier Housing Benefit applications.
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UC Advice & Advocacy