We have already considered how the liability for Council Tax can change in an HMO property and the very different definition of an HMO that can be applied when considering whether or not a property is in fact an HMO.
However, there is another way that an HMO property can interact with council tax and this relates to valuation.
Council Tax is normally charged as against Heritable Property. There is a lot of old legislation and case law on this and what it means, much of it confusing and contradictory, but generally it means homes.
Each heritable property is designated to be a council tax unit and given a band based on value.
Local Billing Authorities (LBA) then set the Council Tax for each band in their area and collect the tax accordingly. However, there is a discretion in certain cases for a LBA to change the valuation of a property.
This happens in two ways.
- Either by changing the band the property falls into (which we won’t discuss further here) or
- by deciding that a property actually comprises of several units instead of just one.
In the second scenario this mean that the property then becomes liable for several council tax payments for different parts of it although probably at a lower band.
One such re-valuation scenario would be on conversion from a single property into flats. However, such a re-valuation is also permitted if the valuation officer believes that the property is being used as an HMO and this is the main area which concerns us here.
The way that Council Tax is defined and charged allows for any property to be split apart where the property comprises of multiple separate dwellings.
A dwelling does not require all the facilities to be provided within it for life and so having shared bathrooms and kitchens is not a way to avoid this. Generally, any property let on a room by room basis risks being re-valued as multiple dwellings and therefore multiple council tax a units.
The discretion that actually exists is one for a valuation officer to join together properties that would otherwise be split as described above. This is known as aggregation and the power to do so comes from the Council Tax (Chargeable Dwellings) Order 1992.
There are a number of criteria that can be used to set out whether aggregation is appropriate which derive from case law.
The first consideration is whether the property now consists of multiple dwellings. Once this has been done then the officer should consider:
1. Sharing of common facilities. More sharing implies a greater degree of aggregation but the fact that a kitchen or bathroom are shared is not sufficient in itself.
2. The amount that the property has been adapted for multiple occupation and the level of self containment of the flats. A total lack of alteration from a normal shared home would weigh in favour of aggregation.
3. The ability to accurately identify separate units.
4. How transient the occupiers are. A high degree of transience characterised by rapid and unpredictable turnover would suggest that aggregation should occur.
The reality is that most modern HMOs now require some level of adaptation to comply with licensing and fire safe obligations and will also increasingly show a level of self-containment as that is what the market seeks.
These properties will therefore tend not to be eligible for aggregation.
The essential point
The essential point is that almost any modern HMO is at risk of being re-valued as multiple Council Tax units.
The only way to avoid this would possibly be to let the property with little or no adaptation on a single joint tenancy to multiple persons. Even that would be no absolute guarantee.
This is an area that more and more local authorities are pursuing as they become aware that increased revenue can be obtained.
The best solution is for landlords to remain aware of the risk of this happening and to ensure that their tenancy agreements allow them to charge any increased council tax back to their tenants.
Further HMO resources:
Advice: If you need some legal advice, for example if you have have been served with an HMO Declaration which you do not agree with, you can use our ‘HMO Hotline‘ telephone advice service.
Training: Easy Law Training has regular workshops on HMO Law & Practice. You can read about these >> here (you will need to scroll down to find out the dates).