Council tax – Liability – House in multiple occupation (HMO) – Regulation 2 of Council Tax (Liability for Owners) Regulations 1992 – Appellant letting house to group of tenants under series of annual shorthold furnished tenancies – Appellant storing unwanted furniture in conservatory – Tenants making separate payments of rent – One tenant ceasing to be tenant but remaining in occupation – Whether property an HMO within Class C of regulation 2– Whether appellant liable for council tax as owner – Appeal allowed
The appellant owned a bungalow in the respondent local authority’s area. In October 1999, she let the property out on an annual shorthold tenancy to a group of four tenants on a furnished basis. Since the tenants did not want to use the furniture that came with the property, the appellant agreed to store it in the conservatory. Successive tenancies were granted until January 2002, when the subsisting tenancy was surrendered and a new one granted to three only of the tenants. However, the fourth, P, remained in occupation until 2005 with the appellant’s agreement. Although the tenancies specified a rent of £1,200 per month for the entire property, in practice each tenant paid his or her share separately direct to the appellant; after P ceased to be a tenant, he paid a lesser amount. The last tenancy came to an end in December 2007.
After the tenants vacated, the respondents discovered that the furniture had been stored in the conservatory. They concluded that the bungalow had been a house in multiple occupation (HMO) during the period of the tenancies since it had been inhabited by a person or persons who had a licence to occupy part only of the dwelling, or who had not been liable to pay rent or a licence fee in respect of the dwelling as a whole, within the definition in Class C of regulation 2 of the Council Tax (Liability for Owners) Regulations 1992. Accordingly, they decided that, under section 8 of the Local Government Finance Act 1992, the appellant, rather than the tenants, was liable for council tax for that period. They therefore demanded outstanding council tax in the sum of £11,035, less the sums that the tenants had previously paid.
The appellant paid the respondents, but she appealed to the valuation tribunal against their decision. Before the tribunal, evidence varied as to whether the conservatory had remained locked and whether the tenants had access to a key. Dismissing the appeal, the tribunal found that the bungalow had been an HMO by virtue of: (i) the arrangement with regard to the conservatory; (ii) the arrangement whereby each tenant made a separate payment of rent; and (iii) later, the presence of P as a non-tenant. The appellant appealed.
Held: The appeal was allowed.
The starting point for considering whether the house had been an HMO during the relevant period was the series of shorthold tenancies, in identical terms, under which the tenants had paid what was described as rent in return for the exclusive possession of the entire bungalow, including the conservatory, and the exclusive use of all the furniture provided by the appellant. Although the storage of the unwanted furniture in the conservatory prevented access to that area, the conservatory remained part of the house that had been demised to the tenants under their furnished tenancy and the only items stored in it were those for which the tenants were paying rent. They continued to have the right to use the furniture or, if they could find other storage facilities, to store it elsewhere and use the conservatory. If the conservatory was locked and they had no access to the key, they could have requested the key at any time. That conclusion followed from an analysis of the facts as found in conjunction with the terms of the lease. The tribunal had erred in disregarding the terms of the lease and in finding that, in effect, the appellant varied the terms of the tenancy agreements or had unilaterally torn up those agreements and imposed a licence in different terms. Since the bungalow was occupied by tenants who, by the unvaried terms of their tenancy, were entitled to occupy the whole of it including the conservatory, it was not an HMO within the first limb of the definition in Class C.
Nor was the second limb of Class C satisfied by the arrangements for the separate payment of rent by each tenant. The correct test was whether the rent charges gave rise to a licence whereby the tenants occupied part only of the dwelling or whether they were paid in respect of part only of the dwelling. They did not give rise to a licence. The tenants were liable under the tenancy agreements to pay rent in respect of the house as a whole, albeit that each wrote a separate cheque for part of the rent. They were jointly liable for the entire rent under the terms of the lease, so that if an tenant defaulted in paying his share, the appellant could have claimed that share from the others. The separate payments were an arrangement of convenience that did not affect or diminish the tenants’ overall liability for the rent in respect of the house as a whole. Accordingly, that arrangement did not make the house an HMO.
P’s occupation of the bungalow after January 2002 made no relevant difference to the situation. P lived in the entire bungalow under either a sublease or a licence from the three tenants and was liable to pay either rent or a licence fee in respect of the dwelling as a whole, including the conservatory. The fact that this sum differed from that paid by the other three tenants was immaterial.
Accordingly, the bungalow had not been an HMO during the relevant period and the appellant was not liable for council tax during that period. Since the respondents had wrongfully claimed and been wrongfully paid council tax payments and related charges in respect of that period, they were obliged to repay those sums to the appellant with interest at the judgment rate; they were not entitled to set those sums against future or unpaid council tax liabilities.
The appellant appeared in person; Adrian Davis (instructed by the legal department of Harrow London Borough Council) appeared for the respondents.
Sally Dobson, barrister
