HMO COUNCIL TAX being changed on each room!

I have no personal experience of this situation as I do not have any HMO's, however a fellow landlord has exactly the same situation. At the behest of the local authority he installed en-suite facilities to all his rooms and the Local Authority promptly charged council tax on the individual rooms (£12k payable by the tenants) rather than the whole building (4k payable by the landlord). He was then asked to reduce the rent so that the tenants could afford the property. His reply cannot be reproduced here.

I had this happen to me out the blue last year.

I have a registered HMO and just paid for the new certificate, my 3rd, when I received an email from the Lambeth Council Tax saying that each room was to be separately valued the next thing I had a whole pile of bills for council tax for each room. Each room was given a name 'first floor middle' etc, no numbers and the tenants weren't able to easily identify which room was theirs (nor me). I was referred to the Valuation Office who had made this decision. If you are self contained and it is considered an habitable space then you are liable for council tax - HMO departments and council tax have no say in this it is purely a decision made by the Valuation Officer. I had very many heated conversations with them as these rooms do come under the umbrella of HMO so I'm at a loss how they can also come under a separate dwelling as well - but it does. The HMO officer was livid as he says that they are crying out for affordable housing in the area and then council tax is slapped on raising the costs for nearly £100 a month - yes!! £100 for a small room. In my case the valuation officer didn't even contact me for access, she snuck in having been let in by a tenant and counted the rooms and noted them (hence the odd naming) I was asked for a floor plan which I provided as in the HMO, which didn't take into account the wardrobes and kitchen areas so was not accurate for council tax banding and some are paying a higher rate because of this - this has to be an appeal now, there is no such thing as a 'mistake' with these people.

All my contracts had 'all inclusive bills' in it so I paid from the back dated 6 months (and only agreed to this because the valuation officer said she could back date 7 years if she was minded) plus another 2 months and changed the contracts, 2 left the rest stayed - plus free wifi.

The pressure is on now because should there be a void this council tax is mine - the tenant can receive a 25% single persons discount but if it is empty I pay full rate, if I pay and include it in the rent I pay full rate. The system stinks.

What was £1800 is now £14,000 but none of these tenants have more than 20 sq ft. They pay more than one person in a £2m property in a very good part of London - in Westminster - my HMO (as was and still registered and paid for) is in Lambeth. Maybe here is the rub - these poor high spending councils with high rates have to get the money in somehow so they go to the people they pretend to be looking after.

During one of my conversations with the Valuation Office I said that I must be the only one being penalised like this and she reeled off a number of other properties near by who had also been captured - I am guessing that they are running their finger down the HMO register and 'visiting'. What annoyed me most was that at no time did they contact me and discuss what was happening so that I had time to prepare (not give out any more all inclusive contacts) and even name the rooms to be easily identifiable. They just came in - they haven't even inspected all of them. If I want to fight it I have to appeal.

My rooms have mini kitchens, the all in one type and most have a shower and wc, some have a shower outside the room. They are easy to let and the rent isn't high and it is well kept, which is why the tenants have stayed, but I bought the property in 1998 - I couldn't afford to let at this level had I bought in recent years.

To get out of the council tax charges I would have to take out anything that would make the rooms a habitable space - kitchens would be the easiest and have shared ones so lose a couple of rentable rooms and the rooms left would be less rent because they are now bedsits - so hiding to nothing comes to mind. So... even though they meet the criteria for an HMO it doesn't mean that they are an HMO for council tax banding. Your local council has no affiliation to the Valuation Office - that is the HMRC. Juggling with soot comes to mind when trying to sort it all out.

This is something I've heard is starting to happen more and more, and as the poster above said is a decision made by the Valuation Office Agency rather than HMO licencing or Council Tax teams at the Council.
The crux seems to be if a room is self-contained i.e. has a mini-kitchen and en-suite, then it's going to be in the scope for Band A Council Tax rating.
If a tenant has to share either a bathroom or kitchen however then you're going to have to argue you're best (and rightly so) that the property is a HMO, and that rooms shouldn't be individually rated for Council Tax.
As we've seen with other recently implemented measures, if you increase costs for the landlord, this will inevitably be passed onto the tenant via rent increases.

A couple of mine are in the second band - due to them not doing their own floor plan cut off point is 20sq m apparently - because they just come in and did a visual inspection behind closed doors, applied the charges and it's for me to appeal.

It's not 'self contained' that is the issue so to avoid confusion I've copied the legislation below.

Legislative Background

2.1 The nature of occupation of units of accommodation contained in some properties will often mean that despite not being self contained these units would have formed separate hereditaments for the purposes of Section 115(1) of the General Rate Act 1967. As a result of the definition of dwelling contained in Section 3(2) of the Local Government Finance Act 1992 (LGFA 1992) each unit would (but for the provisions described in paragraphs 2.2 and 2.3 below) have required a separate band to be attached to it. Examples of premises containing such units of accommodation are those properties frequently referred to as being in "bed-sits" and some tenement blocks where facilities are shared.

2.3 The Council Tax (Chargeable Dwellings) Order 1992 (SI No 549)

Article 2. sets out essential definitions two of which are especially relevant to aggregation.

• The definition of self contained unit is ‘a building or part of a building constructed or adapted for use as separate living accommodation’

This applies to disaggregation within article 3 and to aggregation within article 4 of the Order.

• The definition of multiple property is ‘property which would, apart from this Order, be two or more dwellings within the meaning of Section 3 of the LGFA 1992’.

A ‘Section 3’ dwelling is a hereditament type dwelling, ie one defined by occupation only, and one which, of course, does not have to be self contained in the sense of having all necessary facilities. Where rooms are separately let and a landlord has relinquished paramount occupation, multiple dwellings will exist within a larger self contained unit.

Article 4. of the Chargeable Dwellings Order is worded as follows:-

(1) Where a multiple property –

(a) consists of a single self contained unit, or such a unit together with or containing premises constructed or adapted for non-domestic purposes; and

(b) is occupied as more than one such unit of separate living accommodation,

the listing officer may, if he thinks fit, subject to paragraph (2) below, treat the property as one dwelling.

(2) In exercising his discretion in paragraph (1) above, the listing officer shall have regard to all the circumstances of the case, including the extent, if any, to which the parts of the property separately occupied have been structurally altered."

The effect of this provision is to give the listing officer discretion to treat what would otherwise be a multiple property as a single dwelling in prescribed circumstances. This discretion is similar to that provided by Section 24 of the General Rate Act 1967 for the purposes of domestic rating.

3.0 Interpretation and application of Article 4 – multiple property

3.1 Properties in multiple occupation fall into two main categories, namely;

Category (i) a property which has been constructed for the purpose of a single dwelling but is occupied in parts, with little or no adaptation, or

Category (ii) a property which has been constructed, physically converted or structurally adapted, so as to provide separate units of accommodation for several occupiers with significant degrees of self containment.

All properties that fall within category (i) should, after the exercise of discretion, generally have a single band attached to the whole original self contained unit, whilst those falling within category (ii) should have a band attached to each separate unit of self contained accommodation located within them.

Examples:

1. An old Victorian house given over to bed-sits but with no physical adaptation would satisfy the conditions in Article 4(1)(a) and 4(1)(b). The building was originally constructed as a self contained unit, is multi-occupied but has had no adaptations.(Category (i))

2. Contrast above to a property where proper kitchenettes have been constructed to each room, locks provided to give clear delineation of hereditaments, and where there is a stable pattern of occupation. – Quite often at least one flat in such a building does not share facilities.(Category (ii))

My two cents:

I raised this issue with my local council - Hammersmith and Fulham (H&FC) - as I have a licensed six-bed HMO. I pay the Council Tax.

They said I have nothing to fear if the rooms don't have their own kitchenettes and showers etc. The moral seems to be that if you're considering fitting out your HMO with this kit - don't! H&FC said that they were looking to get away from fully self contained bedsits.

I have always found the HMO team at H&FC to be flexible and pragmatic. It's alarming to hear that they can be usurped by the Valuation Office in a sneaky visit.

By chance today I received an email from Tessa Shepperson (Landlord Law) concerning HMO's, the 13th email in her Summer Legal Update series (Worth subscribing to this free series). Something caught my attention:-

"People are often at cross purposes when speaking about Council Tax and HMOs if they don’t realise that both are governed by different definitions."

Looks a bit like government having its cake and eating it, licence for an HMO but each room treated as a separate residence for council tax.

HMRC really is anti the private sector--and they wonder why shops and other small businesses are closing

parasites==the whole public sector--may/hammond do nothing

I am sure their is case president that I have read where this has been argued and won. It would certainly be worth looking into further and challenging the Council/VO interpretation. The use of a shared kitchen and living room etc is key, however, if your tenants have their own washing facilities, TV and only eat takeaways in their bedroom it may be difficult!

We have experienced this several times and given up the fight. Tenants now pay council tax, but everything else included. We once had an even bigger scare from Building Control. We put in plans for a conversion creating a house with 10 bed-sitting rooms, with en-suite and kitchenettes. Conversion was all complete then with the final BC inspection, with some tenants already moved in, the new officer declared they were all flats, and needed the full independent sound testing, energy performance checks and additional fire protection, as applied to new builds.
This ended in a court case, with barristers employed by both sides, and we ended with a draw. The case was dismissed as they had not acted within the permitted time scale.

student lets?