Who is liable for this council tax bill

Cardinal-Red

Hi all,

The situation is as follows:

• We own a property that we have used for the last few years as a BTL property
• We have a "guaranteed rental" scheme with a local estate agency. The format of this agreement is not an agency one, but instead took the form of us entering a tenancy agreement with the Estate Agency, who then issued a further sub-tenancy in their own name (as Landlord) to the eventual tenants
• This summer we needed take possession of the house again, and so notified the agency and their tenant of this
• We gave the Agency 2 months' notice as required by the contract on 1 September, with expectation of taking the property back on 1 November
• They issued their own notice to their tenant on the same day
• Their tenant actually moved out of the property on or around the 1st October as they had found another property, but crucially they paid the Agency the full month's rent for October, and the Agency paid us our "guaranteed rent" as well
• When we were aware that the property was "empty", we asked whether we could have access to the property during October to perform some necessary remedial works - however the agency refused (the relationship was straining at this point) and it was only on 1 November that we were allowed to access the property
• Their tenant has informed the council that they moved out on 1 October (correct) and they have issued a bill to us for  the period of October until November when the new occupier notified them of their move in date
• I believe that the Agency is responsible for this payment - am I right?

The text of the contract between us and the agent says this (so we are the Landlord):

"The Landlord agrees to pay any standing and usage charge for utilities that may be due for periods where the Property is vacant during the Term of this Agreement. The Landlord agrees to reimburse the Tenant for any council tax payable in respect of any void period."

I have capitalised exactly as per the contract, so neither "vacant" nor "void" are defined in the contract - so I would assume they have their normal meanings. As such, this was not a "void" period - there was a tenancy in place between them and their subtenant; and a tenancy in place between us and them. They agreed to let the tenant move out (although I suppose they couldn't have stopped him anyway) and were paid for this period - so it's not a void period is it?

Any thoughts please?

_Penny_Dreadful

It depends whether the sub-tenant had a fixed or periodic tenancy agreement with their landlord. It is also possible that the sub-tenant left by 1st October by either leaving at the end of a fixed term contract or by serving his own notice to end a periodic tenancy. 

Cardinal-Red

Thanks Penny Dreadful

I think the answer is "periodic" but the arrangement between the Estate Agency and the subtenant was nothing to do with us so we were not party to it. However, I suspect given that the move out happened in response to our notice, that it was not a fixed tenancy, otherwise we'd have just got lucky with the end dates corresponding.

Also the sub-tenant did not serve his own notice - he had 2 months' notice served on him, but left after 1 month (as he found a new property) but paid the rent for the 2nd month anyway.

Ditzy_Mitzy

I can't see how the agency can be responsible for the council tax bill in this particular case, sorry.  Council tax is generally the liability of the occupier, or the owner - such as a landlord - if there is no occupier.  The agency are neither the landlord nor the occupier, so I cannot see how liability can be transferred to them for the month.  The 'tenancy agreement' referred to does not give the agent rights to occupy the house, one assumes, but allows them to sub-let.  In any case, the agency were not occupying the premises in any true sense.  

There is a grey area in relation to the keys not being given back until November 1st, but the assumption is that the agency did so in order to keep the tenancy going 'on paper', despite the fact that the tenant had left.  If re-entry - yours - was allowed early, the outgoing tenant may have had a case to ask for that month's rent back; all that is dependent on paperwork and what was agreed, of course.  You can't have it both ways; either there is a tenancy, for which rent is accepted, or there isn't, meaning you can enter the house but cannot charge rent.  

None of that changes the situation as regards council tax, however.  I can only really  suggest putting the month's 'bonus' rent payment towards the bill.  

user1977

Ditzy_Mitzy said:

I can't see how the agency can be responsible for the council tax bill in this particular case, sorry.  Council tax is generally the liability of the occupier, or the owner - such as a landlord - if there is no occupier.

It would help to see the lease, but I would normally interpret the mid-landlord as being the legal occupier while the property is "vacant" (i.e. not being occupied by a sub-tenant). The OP doesn't have the right to occupy the property while the agency are the (head) tenants. It's probably academic though if the agreement also states that the OP is to reimburse any council tax incurred by the agency.

deannagone

You say that the LA refers to themselves as the LL.  Is that in the contract specifically? Then later on you say the contract says the LL must pay council tax in void periods.  So that suggests that the LA, as the LL should pay council tax in void periods.  

But obviously only you have the contract you signed, you have paraphrased it, so I'd look at it more closely and check how you have paraphrased it in case the actual contract doesn't actually say what you think.  

fatbelly

The way I read it is that the tenant is still the tenant through the month of October because of the date of the notice, and has accepted that by paying rent for that period.

The tenant is liable for council tax through that period.

Ditzy_Mitzy

user1977 said:

Ditzy_Mitzy said:

I can't see how the agency can be responsible for the council tax bill in this particular case, sorry.  Council tax is generally the liability of the occupier, or the owner - such as a landlord - if there is no occupier.

It would help to see the lease, but I would normally interpret the mid-landlord as being the legal occupier while the property is "vacant" (i.e. not being occupied by a sub-tenant). The OP doesn't have the right to occupy the property while the agency are the (head) tenants. It's probably academic though if the agreement also states that the OP is to reimburse any council tax incurred by the agency.

It's all a fudge anyway, on the basis that the agent - the 'mid-tenant' - probably couldn't pay the council tax even if they wanted to.  The 'occupier', for council tax purposes, needs to be a private individual.  The agency is a company, so would be eligible for business rates rather than council tax; the house is residential, so does not attract business rates; so it goes. 

Section62

user1977 said:

Ditzy_Mitzy said:

I can't see how the agency can be responsible for the council tax bill in this particular case, sorry.  Council tax is generally the liability of the occupier, or the owner - such as a landlord - if there is no occupier.

It would help to see the lease, but I would normally interpret the mid-landlord as being the legal occupier while the property is "vacant" (i.e. not being occupied by a sub-tenant). The OP doesn't have the right to occupy the property while the agency are the (head) tenants. It's probably academic though if the agreement also states that the OP is to reimburse any council tax incurred by the agency*.

* "in respect of any void period."

In contract terms I think it will depend how "void period" is interpreted.  On the face of it, the agent (the OP's tenant) had a sub-tenant who was paying rent, albeit not personally occupying the property.  Depending on perspective that could mean the property was a void or a non-void.  The agent is trying to have it both ways - collecting rent and treating the property as a void for contractual purposes (in relation to CT).

I think without seeing all the documentation none of us are going to be able to give a definitive answer, and possibly not even then.

Jude57

Ditzy_Mitzy said:

user1977 said:

Ditzy_Mitzy said:

I can't see how the agency can be responsible for the council tax bill in this particular case, sorry.  Council tax is generally the liability of the occupier, or the owner - such as a landlord - if there is no occupier.

It would help to see the lease, but I would normally interpret the mid-landlord as being the legal occupier while the property is "vacant" (i.e. not being occupied by a sub-tenant). The OP doesn't have the right to occupy the property while the agency are the (head) tenants. It's probably academic though if the agreement also states that the OP is to reimburse any council tax incurred by the agency.

It's all a fudge anyway, on the basis that the agent - the 'mid-tenant' - probably couldn't pay the council tax even if they wanted to.  The 'occupier', for council tax purposes, needs to be a private individual.  The agency is a company, so would be eligible for business rates rather than council tax; the house is residential, so does not attract business rates; so it goes. 

This is incorrect. A company can indeed be liable for, and pay, Council Tax. Nothing in the relevant legislation prohibits a company doing exactly that. Business premises (assessed as such by the Valuation Office) attract National Non-Domestic Rates. Domestic properties such as the one under discussion will never attract NNDR until and unless the property is re-categorised. That would involve an application for change of use and a VO assessment. There's no indication of that happening here so there's no 'fudge' as far as what type of local taxation is payable.

Who is liable? The sub-tenant, in my opinion. The sub-tenant paid rent for the month of October and thus had the right to remain until 1st November when their tenancy ended. The Agent could not let the property to another sub-tenant, nor permit the owner to take possession until the sub-tenant surrendered their tenancy. Therefore, the tenant is liable for November's Council Tax, albeit they may be eligible for a discount based on the property being unoccupied.

Ditzy_Mitzy

Jude57 said:

Ditzy_Mitzy said:

user1977 said:

Ditzy_Mitzy said:

I can't see how the agency can be responsible for the council tax bill in this particular case, sorry.  Council tax is generally the liability of the occupier, or the owner - such as a landlord - if there is no occupier.

It would help to see the lease, but I would normally interpret the mid-landlord as being the legal occupier while the property is "vacant" (i.e. not being occupied by a sub-tenant). The OP doesn't have the right to occupy the property while the agency are the (head) tenants. It's probably academic though if the agreement also states that the OP is to reimburse any council tax incurred by the agency.

It's all a fudge anyway, on the basis that the agent - the 'mid-tenant' - probably couldn't pay the council tax even if they wanted to.  The 'occupier', for council tax purposes, needs to be a private individual.  The agency is a company, so would be eligible for business rates rather than council tax; the house is residential, so does not attract business rates; so it goes. 

This is incorrect. A company can indeed be liable for, and pay, Council Tax. Nothing in the relevant legislation prohibits a company doing exactly that. Business premises (assessed as such by the Valuation Office) attract National Non-Domestic Rates. Domestic properties such as the one under discussion will never attract NNDR until and unless the property is re-categorised. That would involve an application for change of use and a VO assessment. There's no indication of that happening here so there's no 'fudge' as far as what type of local taxation is payable.

Who is liable? The sub-tenant, in my opinion. The sub-tenant paid rent for the month of October and thus had the right to remain until 1st November when their tenancy ended. The Agent could not let the property to another sub-tenant, nor permit the owner to take possession until the sub-tenant surrendered their tenancy. Therefore, the tenant is liable for November's Council Tax, albeit they may be eligible for a discount based on the property being unoccupied.

 A corporate body may be able to pay council tax if it owns unoccupied residential property, yes, but this situation is slightly different in that we have a suggestion that a commercial entity which is not a person, i.e. the agent, is occupying the property for a non-commercial purpose.  That's the fudge, in my opinion.  The underlying owner of the house, here, is the OP.  

Yes the subtenant may be liable on paper, but all parties are in agreement that he or she left the property on 1 October and gave the keys back (we assume).  There was no de facto occupation, despite the subtenant being able to occupy in principle if he had demanded return of the keys or had broken in.  It hasn't been done properly, in that the tenancy either should have ended on 1 October entirely and no further rent paid or the tenancy should have run to 1 November with everything paid by the subtenant.  

The only apparent reasonable outcome is for the OP to pay the council tax and hold on to the rent.  Attempting to sue the subtenant for a month's council tax when it has already been agreed he wasn't actually living there seems like a hiding to nothing.