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  • HMO & Multi-Lets

    Council tax on ensuites in HMO

    Hearing rumours that ensuite bedrooms are going to be assigned ctax for the ensuite unit as opposed to the whole house being singularly banded - as if all the costs of a HMO weren't already busting one balls ?

    What will be the designation of 2 rooms sharing a bathroom ?  in a house with 3 other ensuites

    What abt all these R2R operators working on there 1 room as there profit per month on the whole property ? Looks like there whole profit might get wiped out if there are 4 ensuites in the house - Oxford band A £1171 per year so that's  £100 pm - assuming the tenants aren't going to pay it , which in my opinion they won't with rents at a already maximum ceiling level in most towns- the affordability levels will jus be exceeded for most with a increase of £100 pm on already high rent levels.

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    i bet whoever removed my post must have chuckled at least a little bit, you should be in bed vanessa or nick!

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    This is not news. It has always been the case that council tax valuation officers can reband properties which they consider to be converted or adapted for HMO use or routinely housing multiple households. The fact that the rooms are en suite is not particularly relevant.

    The process of rebanding has been going on for some time in certain local authority areas but it is undoubtedly spreading as local authorities seek to maximise council tax revenues.

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    David Smith
    Landlord & Tenant Solicitor
    Anthony Gold Solicitors

    Find me on LinkedIn: uk.linkedin.com/in/dsnsmith

    All opinions are my own and do not reflect those of my firm. No comment made should be taken as legal advice and you should consult a solicitor or other legal professional for advice on your specific situation.

    I have heard recently of the VOA re-banding one HMO in a street in this manner, and then leaving another HMO down the street with the whole dwelling CT.

    There does not seem to be any rhyme or reason to it.  However, as David said, I think councils who need to claw in money will see it as an easy way to get in more dollar.

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    A key point to remember is that any decision is down to the Valuation Office Agency (VOA) and not the council. The VOA will take information from the council but they are the ones responsible for the ultimate decision (and can, and do, go against what a council would prefer). There are no plans that I'm aware of to change legislation but they may well be looking at previous decisions to see if they are compliant with case law (which many are not).

    If the VOA disaggregate a property under the Council Tax (Chargeable Dwellings) Order 1992 ( as amended) then the requirement is for it to be 'self contained' however, as ever, 'self contained' was never fully defined in legislation. Any decisions on the matter come via case law. It primarily comes to the Listings Officer to make a decision and then any argument needs to come via the Valuation Tribunal.The VOA guidance (including case law on 'self contained' is here - http://manuals.voa.gov.uk/corporate/publ...n-pn5.html

    Quite often the issue is that properties have been adapted and the VOA have never been aware so they have never been able to consider where the property actually falls - part of the problem is that they are bound by case law and legislation when making a decision.If a property meets the definition of 'self contained' and they are aware of it then they have to split it. The main issue falls within legislation and how the situation is defined.

    The whole issue of council tax HMO's is a point that needs looks at - not just from the VOA side but from the council side. I know of many cases where a council themselves treat a property as a HMO where it shouldn't be and vice versa (including cases where a council have knowingly ignored legislation to make it 'easier' on themselves

    What is more worrying is if the VOA were to start to force the issue of HMO's under Section 3 of the LGFA92 (as was discussed in a thread recently and to which I have had a bit of email conversation over) which cuts out any argument over where a property is self contained or not. The decision in the case I looked at used Laing & Sons 1949 (a business rates case) to deem a property as an individual dwelling on the basis the occupier(s) of a room had beneficial, exclusive, actual and non too transient use of the room and thus it met the definition of an individual dwelling on this basis. My particular belief is that the decision was wrong but if it's being used as good case law they should be applying it in every case...

    Craig

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    https://www.LGFA92.co.uk council tax consultants.
    Posting as @CouncilTaxGuy on Twitter
    Why not look at our blog at https://www.lgfa92.co.uk/blog


    Any posts are my own opinion on legislation and may vary from your local authorities !

    I bet few HMO LL would have bothered improving their properties above bog standard had they been aware of this VOA CT rebanding possibility.

    Such a fundamental tax cost being something that had to be factored into the HMO business model must surely be fixed.

    Otherwise how may sensible and informed business decisions be made!?

    This is almost a S24 type event

    Effectively introducing rules which destroy a business model after the investment has been made.

    Many HMO LL may be forced by business imperatives to rip out out all the improvements they have made returning a property to a standard that the VOA couldn't impose ICTB on.

    It would seem that there has been a massive failure in DD by HMO LL as I doubt so many would have invested had they been aware of this ICTB possibility or at least would have kept the properties as a basic HMO.

     Lenders must surely be very concerned as to the ramifications of ICTB.

    They are many and various.

    But they could lead to a downvaluing of a HMO which is subject to ICTB

    The HMO LL could find themselves in extreme negative LTV territory!?

    I'm just so glad I never ventured into the HMO field.

    I don't envy HMO LL at all!

     I would imagine that for the future any LL thinking about investing in a HMO will determine what the maximum level of improvement that could be achieved before ICTB could be imposed by the VOA.

     It does seem counter intuitive that potentially despite LL substantially improving their HMO offer that they may find themselves penalised financially for doing so.

    Shelter etc are always moaning about the quality of the PRS offer

    Well HMO LL who have met that challenge and have improved their HMO offer may be forced out of business for doing so!!

    It all seems a bit ###e about face if you ask me!?

     Whilst I have no doubt that he is correct David Smith's advice or opinion that HMO of any sort have ALWAYS had the possibility of ICTB will be news to many HMO LL

    Many of whom would simply not have risked investing in HMO if there was this ICTB risk!

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    Since April 1993 there's always been the option for the Valuation Office to look at whether a property should be disaggregated, the main issue is that they've not had a ready source of information on these properties in order to be able to check them out. Information sharing seems to be improving which is why more cases are coming to the fore.

    Removal of improvements will make no difference whatsoever if the banding of dwellings under S3 of the LGFA92 is used as case law suggests it should be.

    Craig

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    https://www.LGFA92.co.uk council tax consultants.
    Posting as @CouncilTaxGuy on Twitter
    Why not look at our blog at https://www.lgfa92.co.uk/blog


    Any posts are my own opinion on legislation and may vary from your local authorities !