Property Matters

Council Tax Disaggregation

What is council tax disaggregation and how is this going to affect landlords and tenants in England going forward?

This change actually affects almost all houses in multiple occupation, and some other properties.

Disaggregation was splitting one large building into smaller units, specifically in the case of bedsits. This meant the tenant was liable for the council tax, typically for a band A unit.

From 1 December 2023, Parliament legislated to change the way that Houses in Multiple Occupation (HMOs) are assessed for council tax. Now most HMOs will have one band. This includes individual room lets but does not include a building converted into just self-contained flats. These remain individual assessed.

In many cases there will be no change in who is liable to pay the council tax, however, if the council tax is currently disaggregated and paid by the tenant, from the 1 December 2023 it changed to a single council tax for the building, typically payable by the landlord.

Who is liable for council tax is normally defined in section 6 of The Local Government Finance Act 1992.

However, section 8 includes a power for the Secretary of State to create a special list of properties where section 6 does not apply. This was done in the Council Tax (Liability of Owners) Regulations 1992. These were updated in 1993, 1995 and now in 2023.

These regulations list care homes, religious communities, resident staff, minsters of religion and “Houses in Multiple Occupation” as being treated under section 8. The default situation for the section 8 exemptions is that the “owner” is liable for the council tax, though see later for exclusions to this position.

Until December 2023 the regulations contained their own definition of what made a property an HMO. The change they have made now, includes HMOs defined in section 254 of the Housing Act 2004. This means that in every case where a property let to people from different families, the property will be assessed under these new rules. If fact, two unrelated friends sharing a property is excluded from the Housing Act 2004 definition, but does get caught by this change.4

Although the default position is that the “owner” pays the council tax, if the whole property is rented on a single agreement, even to a group of people, that group of people become liable. This means the net effect of moving from section 6 to section 8 for these contracts is, in practice, nothing. However, where a property is not let on a single contract but a contract, or contracts, for part only of the building the owner will fall liable to the council tax.

This can be a problem because the tenant fees legislation does not allow the landlord to charge the council tax to the tenant, it is only a permitted payment if payable to the billing authority. Where this happens the landlord will need to make use of the next rent increase or renewal to adjust the rent.

Renters Reform proposed changes Students
Where a house in multiple occupation (HMO) is let to full time students that are joint and severely liable, there is proposed a new ground which will mean a landlord or their agent will be able to serve a section 8 ground 4A for possession to be able to re-let the property for the next academic year. This notice can to expire between 1 June – 30 September in any year.

Pets

Where a landlord will not be able to unreasonably refuse the tenants request for a pet in the property, they can insist the tenant has pet insurance that covers any damage to the property that the pet has caused. If the tenant does not wish to have insurance the landlord can take it out on their behalf and offset the charge to them. Which doesn’t seem like a bad idea as the landlord then knows what damage will be covered.

Removal of section 21
When the use of the section 21 has been removed, the plan is to have a 12 month transitional period for existing tenancies that have an assured shorthold tenancy. The landlord will still be able to serve a section 21 (no fault eviction) for possession of their property during this time.

No DSS
There will be a ban on a blanket policy of refusing applicants in receipt of benefits, however, they would still be required to meet the financial criteria set by the landlord or their agent.