HMO outrage for landlords & tenants – this time it’s Council Tax!

I have just caught up with this thread and the one on PT. I posted this on PT for information that might help those who have to fight a Council Tax rebanding case.

Last year I fought a case for a landlord as follows

1. Landlord owned and let a large traditional HMO with 6 rooms over 2 floors
2. Tenants were all unrelated and had separate AST's
3. Each tenant lived in his own room which has a "kitchenett" and shared the bathrooms, toilets and livingroom
4. The landlord was billed for council tax for the whole property
5. Tenants were people on modest incomes who paid £60 a week for each room

The landlord decided that it was time to upgrade the property and to divide each bathroom so that each tenant had a self contained unit which included a small shower room. No walls were removed, partitions were put in and doors blocked onto hallways and opend into bedrooms. The landlord did not need planning consent but he did apply for building regs.

When the work was completed the Valuation Officer called, no doubt he was told by the Planning Department. He informed the landlord that each unit was now self contained and therefore would be banded separately for Council Tax. The overall bill was 400% of the orginal Council Tax bill and each tenant was billed separately.

The landlord was horrified and discounted his rents by the amount of Council Tax that he was saving. In less than a year he had 2/3rds of the rooms empy because his tenants could afford the rent but not the additional Council Tax despite being given better accommodation they moved out. The landlord could not fill his rooms.

We fought this all the way to the Senior Valuation Officer in Birmingham and we lost.
The reason that we were given was

While the properties were traditional bedsits with cooking facilities but shared bathrooms/toilets the property was an HMO by Council Tax definition, this is totally separate from the HA 2004 definition of an HMO. Once the personal hygene facilities became self contained the property was, by Council Tax definition, a block of self contained flats which must each be separately banded and the tenants would be liable for payment.

Obviously the Valuation Office mentioned in this discussion uses different rules?The rules that Birmingham have used protect the tradtional HMO from the issue.

As an aside If a student property in Birmingham is let on separate AST's the landlord is responsible for payment, if they are all on one AST the students are responsible.
I know that students are exempt from Council Tax because they are in full time education but last year Birmingham began charging for the period from the end of term, June until the start of the new year, October on the basis that during this time they were not in full time education and many of the tenants worked!!

Tee, the council will not be out of pocket! - for every student or unemployed person that is exempt from having to pay their council tax themselves, the local authority claims that amount from central government - so you and I and every taxpayer area actually paying it. This is absolute fact that very few people realise, the council still receive that payment, it just comes from central government instead.

So when the VOA re-band a property into many individual Band A's and the now many individual council tax bills fall on the unemployed or a student who is exempt, this amount is reclaimed from central government by the council - it is an outrageous scam and just to wind you up a little more - Central Government in its desire to increase house building offers a bonus to each local authority for any new dwellings they create, this bonus is equal to the council tax payments paid to the council for the first six years after the creation of any new dwellings - our research shows us that councils are submitting each of the individual newly banded HMO rooms to central government as a new band A dwelling and collecting a 'New Homes Bonus' equal to the council tax for the first six years - A property we are aware of has gone from the landlord paying a Band E payment of approximately £2000 a year to each of the 10 bedrooms (they are not self contained) now facing a levy of approximately £1000 giving the council a new tax take of approximately 10,000 a year matched by the governments New Homes Bonus equal to the council tax levy of another 10,000 a year so a grand total of approximately £20,000 a year for the first six years, and the majority of this will be paid for through tax by central gov as many - if not all the future residents of HMO's will be council tax exempt.

Don't take my word for it, do your own research - fire off your own freedom of information requests and spread the word, these cooks in the councils must be stopped.

A belated addition to this thread: I have checked the VOA website and here is what it says at http://www.voa.gov.uk/corporate/CouncilTax/multiOccupiedHomes.html

Here are some examples of how different types of HMO are banded:

- HMOs with little or no adaptation: Where minor adaptations like door locks are added, and the occupants of the separately let parts share the kitchen and bathroom of the original house, then the VOA can put the whole property into one band.

- HMOs with adaptations to each floor: Where each floor of a house let in parts has standard facilities and can be treated as a self-contained unit, then each floor is able to be given a single band. This applies where the occupiers of the floor share a kitchen and a bathroom.

- HMOs with adapted letting rooms: Separately let rooms in a HMO may have been adapted, for example, so that they have their own kitchenette or separate shower/bath and WC. They will be given their own band even though may share some facilities. In making a decision, the VOA will look at the degree to which each part has been structurally altered.

There are also pictorial examples in the VOA Practice Manual at http://www.voa.gov.uk/corporate/Publications/Manuals/CouncilTaxManual/council_tax_man_pn/ct-man-pn6-app2.html#TopOfPage

The implication to me as someone who runs houseshares is: don't over-improve your property. If you start adding a second kitchen, cooking facilities in each bedroom, or make every bedroom ensuite, you are asking for trouble if you tangle with the VOA.

And frankly, in my view any landlord who runs a houseshare like those portrayed n the Practice Manual - eight ensuite bedrooms, only one kitchen and no communal living space at all - deserves to be revalued and should be ashamed of themselves.