Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Council Tax in HMOs

An interesting new case in the High Court which was highlighted by the excellent NearlyLegal blog.

Where a property is an HMO for Council Tax purposes then the lanldord has the primary liability for Council Tax. The test for an HMO is different from that set out in the Housing Act 2004 and is provided by the Council Tax (Liability for Owners) Regulations 1992. This says:

The following are the classes of chargeable dwellings prescribed for the purposes of section 8(1) of the of section 8(1) of the [LGFA]-
Houses in multiple occupation, etc
Class C a dwelling which
(a) was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household; or
(b) is inhabited by a person who, or by two or more persons each of whom either-
(1) is a tenant of, or has a licence to occupy, part only of the dwelling; or
(2) has a licence to occupy, but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of the dwelling as a whole.

In this case there were a group of tenants occupying the property on a single AST. As is common in these cases they were each paying a ‘share’ of the rent direct to the landlord. The conservatory at the property was unusable because the tenants had placed all of the landlord’s furniture in it (by agreement) as they had no use for it.

The tenants left owing in excess of £11,000 in Council Tax. Harrow tried to make the landlord pay it. The landlord appealed to the Valuation Tribunal who focused on the issue of the tenants paying ‘shares’ of rent and the inaccessibility of the conservatory and therefore found against the landlord.

The landlord appealed to the High Court. The High Court held that the Tribunal should have started by looking at the tenancy agreements. On the evidence there was nothing in the paying of shares that undermined the basic position that the tenants were jointly and severally liable for the rent and had access to the whole of the property. The conservatory was clearly available to the tenants on the evidence had they wished to clear it of the landlord’s furniture and use it.

The Tribunal had erred in law by assuming that payment of shares of rent equated to an HMO. The correct test was whether “the rent charges gave rise to a licence whereby they only occupied part only of the dwelling or whether they were paid in respect of part only of the dwelling.”

This is important as a great many local authorities are aggressively pursuing landlords in respect of tenants who fail to pay their council tax. This can usually be avoided by putting all tenants on a single agreement and not reserving any part of the proeprty for the landlord’s own use or storage.

Filed under: England & Wales, FLW Article, ,

Mortgage Protection Notice Requirements Set Out

Further to our previous post on the bringing into force of the Mortgage Repossessions (Protection of Tenants etc) Act 2010 the Statutory Instrument setting out the notifications required to be given to possible tenants or occupiers of the property and the form of those notices.

The Dwelling Houses (Execution of Possession Orders by Mortgagees) Regulations 2010 requires that the mortgagee gives notice t the time they apply for a Warrant of Execution to instruct the County Court bailiff to enforce a possession order. When doing so they must also send a notice to the property by first class post or by hand delivery or personal service addressed either to the tenant in their own name or to “The Tenant or Occupier”. The form of this notice is set out in detail and it specifies all the details of the Court who will be dealing with the matter and the details of the mortgagee who is seeking possession. It also spells out the tenant’s new rights under the Act to ask for a stay of 2 months in the execution of the warrant and the process by which this is to be done.

This is a welcome development in ensuring the increased protection of tenants. It is a shame that it has taken so long to implement after so many tenants have suffered short notice evictions due to landlords not seeking mortgagee consent for their letting and then failing to pay the mortgage.

How much use a two month delay will really be to tenants is not clear but it is certainly better than nothing.

Filed under: England & Wales, , ,

Tenant Mortgage Protection Legislation Coming into Force

We have previously posted on the Mortgage Repossessions (Protection of Tenants etc) Act 2010 which was passed through Parliament in the sweeping up process immediately prior to the election. There was some doubt as to whether the new government would actually bring the Act into force but it seems that they have decided to do so.

Briefly, the new Act allows for tenants whose tenancies were not authorised by a mortgage lender to request a 2 month stay on an order for possession or the execution of a warrant for possession by the mortgagee. If the mortgagee will not grant such a stay in writing then the tenant has the power to apply to the Court for the same stay.

The Court is not obliged to grant the stay and will consider the cirumstances of each case and, in particular, will look at the conduct of the tenant and any breaches of the tenancy agreement committed by the tenant. It can also require the tenant to pay the rent direct to the mortgagee during the period of the stay.

The Act also creates a power for the government to set a standard form of notice which the mortgagee must give at the property and they cannot obtain possession until that notice has been given.

The commencement order which has been passed allows for the regulations to enable the notice process to be made immediately and brings the rest of the Act into force on 1 October 2010.

Filed under: England & Wales,

Sale and Rent Back- Final Rules

The FSA has released its final rules for firms engaged in Sale and Rent Back (SRB) activity. From 30 June 2010 no firm may engage in sale and rent back activity, including the administration of ongoing schemes, unless they have been granted a permission by the FSA under the full regime. This means that firms who had permission under the interim regime must also stop all activity unless they also obtained a full permission.

The new rules limit the advertising and sale of SRB schemes banning the use of certain wording in advertising (eg. ‘mortgage rescue’), the use of cold calling and high-pressure selling techniques and also introduce a 14-day ‘cooling off period’.

The regime imposes a set method of valuing the property, with a standard letter of instruction to a surveyor instructed jointly by the parties, and a series of requirements to ensue full disclosure.

There are limitations on the type of tenancy that can be granted with the term not permitted to be less than 5 years and the rights of the lender to recover the property for breach heavily restricted.

This is a positive step forward but it has taken a long time to appear.

Filed under: England & Wales, ,

Uncertainty About Tenancy Agreements Approaching 1 October

We have been asked a lot of questions recently about how to draw up a tenancy agreement in the run up to 1 October.

The short answer is that it does not really matter. Tenancies that will become ASTs on 1 October will become ASTs on that date irrespective of what the actual agreement says. Equally, they will not be ASTs before that date irrespective of the wording on the agreement.

Therefore agents can draw up these tenancies on Common Law Agreements now and accept that the agreement will misdescribe itself from 1 October or they can draw them up as ASTs now and accept that the agreement will misdescribe itself until 1 October. Alternatively, the agreement can state that it will change to an AST on 1 October or a new agreement can be issued on that date. All of these are reasonable approaches and each agent and landlord should decide what works best for them. Anyone purporting to sell some form of agreement that will deal with the situation is really just taking money for old rope and this is the reason that this firm has chosen not to produce a special tenancy agreement to cover the transitional period.

What will be necessary for members of The Dispute Service will be to make sure that the prescribed clauses required by the scheme are incorporated into the Agreement after 1 October. This can easily be done by sending the tenant a letter setting out the clauses and stating that they will be incorporated into the agreement. It would be wise to ask the tenant to sign and return a copy for recording purposes.

Don’t forget that when the deposit is registered a copy of the registration certificate, the information required by the Housing (Tenancy Deposit) (Prescribed Information) Order and the appropriate scheme leaflet must also be sent as well.

Filed under: England only, ,

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