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  • HMO & Multi-Lets

    HMO, Individual Council Tax Banding

    Just read a very interesting post on property118 on HMO council banding

    Some poor LL has just been assessed for ICT increasing council tax on his HMO from £1800 to £10000 per year!!!!!!

    Now I have long conjectured that this would occur calling into question the HMO business model.

    However it is for these issues amongst many others that I have avoided anything to do with HMO's

    However before being too smug about this it could be that that I find I might well be subject to this ICT at some time in the very near future.

    This is related to changes in the Housing Bill which can make a 3 bed house an HMO if occupied by 3 or more individual households or perhaps just 3 people

    Now I currently legally have 4 tenants comprising of two households each in one of the two bedrooms in a purpose built flat.

    Now if by retaining this tenant makeup it seems to me that I may face the possibility of being charged ICT for each room!!

    There are so many variables that could occur here it seems to me to that any property being occupied by more than two people could face HMO status.

    Meaning ICT per room!!!

    This means that either rents would have to substantially increase or I would have to get rid of two tenants or get rid of all four and have a family.

    Few families want 2 bed properties or can afford them.

    I would welcome everybody's opinions and ideas on this HMO ICT issue as I believe it could well be affecting those properties which will be considered HMO's requiring licensing which currently don't and are usually just purpose built flats or houses with no adaption at all

    Obviously the way to avoid ICT is to reduce the property tenants to less than 3 if comprising individual households.

    But doing that would mean millions of tenants being evicted.

    This HMO ICTB issue is a virtual storm to hit the PRS.

    It seems I may have to get rid of my sharers and find a family who can afford my rent......I would struggle to achieve this.

    Meaning my flats are no longer viable, meaning I will be bankrupted!!!

    Or of course I just keep my mouth shut and fail to register my purpose built flats as HMO' s

    I wonder what I might do!?

    Everyone should read the property118 thread about this HMO issue and then comment on here.

    I particularly invite comment from those who are existing HMO LL and certainly those who currently have tenant sharers of 3 or more people in a normal purpose built property that is NOT CURRENTLY a licencible HMO property.

    I confess I am very concerned and am far from sure of the impact of this ICT on my possibly very newly imposed HMO status!!?

    Any ideas people!?

     I would add that if any responders were able to apply a link on this thread to the property118 HMO thread I would be much obliged.

    I would have done so but I don't know how do it!

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    There is no current housing bill to change council tax in the way you describe. However, it has always been the case that letting to sharers means a property could be an HMO for council tax purposes. This is called disaggregation.

    In any event a letting to three individual people who form two or more households will be an HMO for the purposes of the Housing Act 2004 in all cases, it is just that many local authorities do not licence these properties. However, the definition of an HMO for council tax purposes is different and relates more to how the property is used.

    If you wish to avoid council tax suggesting your property is an HMO then the best way to avoid with this is to let your property on single joint tenancies so that the entire property is shared between the tenants. If you let as a series of individual room lets then you are at serious risk of your property being re-valued and banded as an HMO.

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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.

    David

    thank you for that very cogent response

    It seems that based on my current set up

    4 tenants on a joint tenancy

    Means that I am currently safe from ICTB though NOT from HMO licensing and any requirements it may have.

    Of course many LL work the system legally with HB tenants by charging 1 bedroom LHA rate rather than a room rate

    They issue individual AST's per room

    Now if Councils decide to charge ICT in this scenario they will charge the LL

    Possibly they will receive CT relief depending on circumstances, but I can see this HB strategy coming to an end.

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    If your properties rooms dont have onsuites with wc's it doesnt matter, nowhere on there website does it give examples of seperate bandings unless the rooms have their own onsuites / kitchettes or kitchette on their own level.

    See

    http://manuals.voa.gov.uk/corporate/publ...-app2.html

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    Not sure about my flats Iggy

    My flats have two bathrooms

    One is en-suite, the other is a separate main bathroom.

    Do you think I am OK as far as this ICTB is concerned if by having more than 3 people on the same AST?

    Funnily enough after all the various useful responses to my original post I had a conversation at one of the nearby LA.

    When I posed the issue of 3 separate households on one AST the LA stated they discourage this sort of tenancy due to HMO concerns

    I responded that as there was no adaption required even for a purpose built flat what was the problem!?

    This LA just was against the sort of set up I currently have.

    Such sharing circumstances are the only way two separate households can afford to rent a 2 bed property.

    It seems most LL according to this LA don't like tenant sharers..

    They prefer single households

    Well that I'd just plain unrealistic as they simply can't afford it.

    So I have no problem with 4 people on one AST sharing my flat.

    Yes they may be very slightly more wear and tear

    Though I would conjecture that two parents and two children could cause far more wear and year!!

    The only bit of my flat which I reckon could get more wear with 4 people is the washing machine

    But if children were part a single household tenancy the wear and tear on the washing machine would be far more then 4 adults.

    So I don't get why LL are seemingly so reluctant to have two households on one AST agreement

    Perhaps I am not considering the business dynamics correctly and I certainly invite any critique of what I am currently doing.

    I accept that I may not be managing things properly and welcome any advices as to what or how I should be doing things in light of possible future HMO licensing.

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    I enquirer about this directly to the VOA I was told that the banding per room is based on properties that are self contained.

    I hear you Saj well all HMO's are, but the officer I spoke to said it's the rooms that could be large enough to work as self contained include ensuites and kitchenettes that could be banded like this. It's also important that in the event they are banded each room is entitled to 25% Individual Rate Council Tax reduction.

    It is far cheaper to remove a kitchenette and have a shared kitchen. The problem here is Individual VOA are interpreting the direction from the government differently with some being stupid enough to band individually even without self contained amenities.

    I think the worrying factor is not this but that local authorities like Liverpool want to push business rates on us and with social care st a crisis and government giving the green light for LA to increase residential CT, it would be logical to expect them to target hmo landlords yet again.

    What they do not realise is the profits are not as amazing as claimed if all costs are included. The fact is if this is the case then HMOS that are generally know for including CT within the price will simply not include them.

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    The issue of business rates is of course a massive one.

    But last Parliament Govt slapped a council down that tried that one.

    But of course as a way to fund councils with additional income; with that coming from the PRS Govt knows it won't lose any votes from screwing LL even more!!

    Tenants might not be too happy when their rent is increased to cope with the CT increases.

    But of course then there will be the general accusation that greedy LL are again increasing rents to unaffordable levels.

    Govt sits on the sidelines smugly watching the LL get crucified even more whilst councils rob LL and tenants alike of even more CT, even though Govt was the cause of the increases

    I do believe that Govt is using the PRS as a cash cow.

    Comes to squeeze even more out of it if it wants some more cash for whatever.

    At some point they will squeeze so much that the udder will have dried up!

    What then!!?

    Cos loads of LL will have given up by then

    Millions of homeless tenants!!

    As far as HMO CT is concerned isn't the problem here that tenants aren't liable for CT, the LL is!?

    The only way a LL could cover this is to include it in the rent.

    If a tenant doesn't pay the CT bill the council will come after the LL NOT the tenant!

    Business rates----I simply can't see how an HMO or even a standard letting would remain viable

    What would be the business rates on your average two bed terrace house compared to residential CT?

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    "with some being stupid enough to band individually even without self contained amenities"

    How?

    They are not allowed to band seperatly if the rooms are not self contained.

    See the examples on their website:

    http://manuals.voa.gov.uk/corporate/publ...-app2.html

    On all the examples the rooms either had

    1) Their own ensuite with wc

    2) Their own kitchentte on their level

    3) Their own kitchette in their room.

    Nowhere does it allow them to just randomly decide rooms can be seperatly banded unless they have one of the above situations regardless of what type of tenancy contract the house is set up on or how the house layout was before.

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    Sadly I'm a poor sod who has been banded on bedrooms in an HMO. In the past two years I have been banded on 2 properties, each with 6 bedrooms and the tax on each house has risen 300% as a result.

    I spent 2 years fighting the VOA , appealing and then on to a Tribunal and having meetings with the local authorities to fight our corner. Some of our rooms were not en suite, let alone self contained with food prep areas. Sadly our case was dismissed. It's important to understand that its not just about being self-contained. I've written below a paragraph from my tribunal decision which will hopefully help:

    The Panel had to decide whether the six bedrooms were separate dwellings for the purpose of Council Tax. If the Panel found that the rooms were separate dwellings then each room would be entered into the Valuation List and the Panel would not need to consider whether the rooms were self-contained whereas if the Panel considered the rooms were not separate dwellings it would then have to consider whether the rooms were self-contained units.

    The Panel first had to consider Section 3 of LGFA 1992 which defined what was a dwelling. The LGFA 1992 Act referred to the paragraph 115 of 1967 Act and the definition of hereditament (dwelling). In case law a hereditament is linked to the term rateable occupation and therefore to be a hereditament (dwelling) it must meet the four ingredients established in the Court of Appeal Decision of J.Laing & Son v KIngswood Assessment Committee (1949) which are: 1) Actual Occupation 2) Beneficial Occupation 3) Exclusive Occupation 4) Occupation for not too transient a period

    So, on this basis my rooms were rated as I have individual 6 month AST's with individuals having their own exclusive room.

    My biggest gripe with this tax is that its very hit and miss, some Local Authorities don't bother with it and some just dip their toe in (like mine) which makes for a very un level playing field to operate in

    David, I'm interested to know with regards to a single shared Agreement, whether you think I might have a hope in reversing my existing bandings? I had been led to believe by others this would not work. Or are you suggesting this approach purely for non-licensed smaller properties which share?


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    so why didnt you just change your contracts to a group one to avoid this problem rather than fighting in court for 2 years?

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    Hi Olivia,

    I know that you lost at the First Tier Tribunal but I think the VOA have got it wrong.

    its only one Hereditament and it can't not be disagreegated or agreegated.

    Ive gone to see a Barrister ahead of my Tribunal on the 16th.

    Id like to talk to if possible?

    Kind Regards


    Gary Bees

    07711993950


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