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Our HMO buy-to-let Mortgage landlords have raised concerns about this controversial system for a number of years. According to a recent article from the National Residential Landlord Association (NRLA), the unfair council tax system on HMO properties is looking to be axed, following pressure from the NRLA and the HMO Council Tax Reform Group.
Calls for HMO Council Tax per room to be scrapped
The Valuation Office Agency (VOA) evaluates HMO properties for council tax purposes, however, in the process called disaggregation, the VOA can ‘split’ a HMO into single dwellings for council tax purposes and re-band them, meaning landlords are liable to pay HMO council tax per bedroom, rather than for their property as a whole; this can be up to £1,000 per room even after the single person discount has been applied.
There also seems to be no structure or blanket rules as to which HMO properties are picked for disaggregation; a HMO property in one postcode may be affected and one in the neighboring postcode not.
Furthermore, the rooms don’t even need to be fully self-contained to be affected by the disaggregation, with no means of appeal for the landlords.
What is the effect on our HMO Buy-to-Let Mortgage Landlords & their Tenants?
The controversial unfair system has seen HMO landlords being hit with large council tax bills, adding thousands of pounds of which is not budgeted for; leaving them no choice but to increase tenant rent to cover the costs.
In some cases, the VOA has reclassified the council tax on some HMO properties as far back as 3 years, issuing landlords and previous occupants with a backdated bill of up to £3,000, which is understandably causing distress and misery, especially at a time when other living costs are rising.
Tenants of HMO properties are essentially paying to rent a bedroom with shared facilities, they are not expecting to pay council tax on this, in turn, impacting their finances with unforeseen and unjust bills.
Is there hope for our HMO Buy-to-Let Mortgage Landlords?
The desired outcome would be an amendment to the Local Government Finance Act 1992 – the act that gives the VOA its powers.
The NRLA has written to the Law Commission and the Government, campaigning against this practice for some time now, in conjunction with the HMO Council Tax Reform Group.
The Government is seeking input on two possibilities for amending the council tax legislation; both ideas call for taxing HMO properties as single dwellings and allowing for restricted disaggregation to only those properties that are divided into discrete self-contained units.
This proposal is highly welcoming to hear within the HMO landlord community, with HMO properties being a popular situation for the younger generation (often at the start of their careers), this proposal will not only save the tenants money in these uncertain times but also keep a thriving HMO community alive; which is promising news for our HMO Mortgage Landlords.
How can Advocate Finance help?
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