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How to ensure your Tenant is liable for Council tax at the end of their Tenancy

Posted on September 05, 2016

Coodes Partner and Commercial Property lawyer Paula Dunkley looks at a recent High Court case and how this has important implications for landlords seeking to ensure they don’t get saddled with a Council Tax bill if a tenant leaves a property unoccupied.

A common question for a landlord is who is responsible for Council Tax for an unoccupied property where the tenancy has not been properly ended? For example, the tenant has left without giving the appropriate notice.

The answer is not straightforward.

Where a property is unoccupied, the legal position is that the “owner” is liable. The owner being the person who has the inferior material interest which includes a leasehold interest of 6 months or more, i.e., a tenant under an assured shorthold tenancy agreement (AST).

However, the position where the fixed term under the AST has expired and the tenant had continued to occupy is not so easy to determine. Arguably, unless the tenancy agreement provides otherwise, the tenancy becomes a statutory periodic tenancy at the end of the fixed term. Under a statutory periodic tenancy a tenant who leaves a property unoccupied is no longer the “owner” as they do not have a leasehold interest of more than 6 months. Therefore whether or not they have given the correct notice to end the tenancy, the responsibility for Council Tax passes back to the lLandlord upon the property becoming vacant.

The High Court recently considered a case where the question arose as to who is liable for Council Tax if the AST contains a clause that the tenancy continues as a contractual periodic tenancy (rather than statutory) at the end of the term.

In Leeds City Council v. Broadley [2016] EWHC 1839, the court had to consider whether or not the freehold owner or his tenants was or were the owner of the properties for the purposes of Section 6 of the Government Finance Act 1992 where the properties had no resident for the periods in dispute.

The Tenancy agreements were all in similar format and contained the following (relevant) provisions:

“Whereas the landlord agrees to let the premises known as…..for a term of [6 or 12] months and thereafter continuing on a monthly basis unless terminated by either party under the provisions of Clause 3
Paying therefore the rent of ….per calendar month….

1. The landlord lets and the tenant takes the property for the term at the rent payable as above.

2. This agreement is intended to create an assured shorthold tenancy under the provisions of the Housing Act 1988.

3. This agreement may be terminated by either party giving to the other one full calendar month’s written notice provided that no such notice may be served during the first [6 or 12 as above] months of the term.”

The implication of these clauses meaning that the tenancy continued at the end of the term rather than coming to an end and ensuring that no statutory periodic tenancy arises and instead a contractual periodic tenancy continues until either party gives the appropriate notice.

The court in looking at the facts of this particular case held the following

“This tenancy agreement created a term which is neither simply a fixed term nor a periodic tenancy, nor one followed by the other. It is a term which has the characteristics of a fixed term followed by a periodic tenancy…. Whilst this on the face of it this could create uncertainty, the court felt there was no uncertainty of term. And the terms were of over 6 months, and as such a valid material interest.”

Crucially, therefore, the Council Tax liability remained with the tenant as the tenancy continued.

However, to ensure this is the case for your own Tenants, the following criteria must be met:

• The initial fixed (or minimum) term must be at least 6 months or more, and

• The tenancy agreement must contain a term that it continues upon expiry of the term.

If the tenancy agreement remains silent on these points, then a new statutory tenancy will arise and the Landlord will normally be liable for Council Tax for the period whilst the property is empty, even if the tenancy is not at an end.

If the tenancy agreement does contain these provisions then the tenant will usually be liable until the tenancy has been properly ended.

 

For any advice in relation to your responsibilities as a landlord, please contact the team on 01872 246200 or info@coodes.co.uk

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