Council Tax and HMOs
Council Tax and HMOs: Why Landlords Need to Check Who Is Liable
TLDR; Council tax liability for shared houses has changed. Landlords should no longer assume tenants are liable just because they signed one joint tenancy agreement.
Since the December 2023 rule change, councils may treat shared houses occupied by unrelated tenants as HMOs for council tax purposes. If they do, the landlord is usually billed.
Some councils are applying the rules differently. Nottingham appears to be taking a stricter approach, while Birmingham’s published guidance appears to place more weight on joint tenancies. This inconsistency is likely to reduce as councils update their guidance.
--- Council tax liability for shared houses has become a bigger issue for landlords.
For years, many landlords worked on a simple assumption:
If tenants signed one joint and several tenancy agreement which made the tenants responsible for council tax it's the landlord is protected.
That assumption is now risky.
Changes to the council tax rules for Houses in Multiple Occupation made in 2023 mean more landlords are likely to receive council tax bills for shared houses, even where tenants have signed one joint tenancy.
This is important for landlords with student houses, professional shared houses, and mixed student and professional lets.
---
What has changed?
In December 2023, the government changed the council tax rules for HMOs in England.
The big issue covered in this legislation was to restrict coucil's from clasifying each room in an HMO as being individualy liable for council tax. Additionaly, it brought the council tax definition of an HMO closer to the Housing Act 2004 definition.
That matters because the Housing Act definition focuses on how people occupy the property. It looks at whether people form more than one household and whether they share facilities such as a kitchen or bathroom.
It does not simply ask whether everyone signed the same tenancy agreement.
This means a house rented to unrelated tenants under one joint tenancy may still be treated as an HMO for council tax purposes.
If the property is treated as an HMO for council tax, the landlord is usually liable for the council tax bill.
You can read the government’s update here:
Council Tax Information Letter 3/2023: changes to regulations for HMOs---
Does a joint tenancy still protect the landlord?
Not necessarily.
A joint and several tenancy still matters for many reasons. It means the tenants are jointly responsible for the rent and tenancy obligations.
But it does not automatically mean the tenants form one household.
Three unrelated friends living together are usually three separate households. One tenancy agreement does not turn them into one family unit.
This is where landlords need to be careful.
Before the rule change, joint tenancies were often treated differently from room-by-room tenancies for council tax purposes. That led many landlords to believe that a joint tenancy meant the tenants were liable.
That position is now much less safe.
Landlords should not assume that the tenancy structure alone decides council tax liability.---
Why are councils applying this differently?
This is part of the problem.
Some councils appear to be applying the new rules more actively than others.
For example:
- Nottingham City Council appears to be taking the position that unrelated tenants sharing a property may bring the property within the HMO rules for council tax purposes, even where there is a joint tenancy.
- Birmingham City Council’s published guidance appears to place more weight on whether the tenants have exclusive use of the whole property under a joint tenancy.
It does not mean both approaches will remain in place. Council guidance often takes time to catch up with changes in legislation. Some council websites may still reflect older practice, older wording, or a simplified version of the rules.
You can see Birmingham City Council’s guidance here:
Birmingham City Council: Council Tax and HMOsThe safest position for landlords is this:
Do not rely on what one council says if your property is in another council area. Ask the billing authority to explain its legal basis in writing.
---
What is an HMO for council tax purposes?
A property may be treated as an HMO where:
A household usually means:
- A single person
- A couple
- People from the same family
So, a property occupied by three unrelated professional tenants is likely to raise council tax HMO issues.
A property occupied by one family is less likely to do so.
A property occupied by mixed students and professionals needs careful checking.
---
What about student properties?
Student properties need particular care.
A property occupied only by full-time students may qualify for a student exemption.
But a mixed house is different.
If some tenants are students and some are professionals, the position may change. The property may not qualify for a full exemption. The council may bill the landlord if the property is treated as an HMO for council tax purposes.
Landlords should keep student certificates for every relevant occupier.
Do not rely on the tenants to deal with this after the bill arrives.
---
What happens if the council sends the bill to the wrong address?
This is a practical issue we are seeing more often.
A council tax bill is not a normal commercial invoice. It is a statutory demand notice.
The council must issue and serve the demand notice before it takes recovery action.
If the council sends the bill and reminder to the wrong address, landlords and agents should challenge any summons costs.
This does not always remove the council tax liability itself.
But it may give you a strong argument against recovery costs.
For example, if a managing agent has told the council to send correspondence to the agent, but the council sends the bill somewhere else, it is reasonable to ask the council to withdraw summons costs.
The key is evidence.
Keep:
- Emails to the council
- Call reference numbers
- Copies of address change requests
- Payment records
- Copies of bills and reminders
- Notes of who you spoke to and when
Is it the landlord’s job to chase a bill?
Council tax is an annual liability. Landlords know bills usually go out in March for payment from April.
That does not remove the council’s duty to serve a proper demand notice.
If a bill does not arrive, a sensible landlord or agent should check the account. That is good practice.
But councils should not use this as a blanket argument to justify poor administration.
If the council sent the bill to the wrong address, or failed to update its records after being told who manages the property, challenge the summons costs.
The practical advice is simple:
Check council tax accounts every March or April. Do not wait for a summons.
Shelter gives a useful overview of council tax recovery here:
Shelter: Council tax recovery---
What should landlords do if they receive a council tax bill?
Do not ignore it.
Work through these steps:
If the landlord is liable, deal with the bill quickly.
If you dispute liability, raise the dispute in writing and provide evidence.
---
What should landlords do if they receive a summons?
Act straight away.
A summons means the council has started recovery action.
You should separate two issues:
The council tax may still be payable.
But the summons costs may be challengeable, especially if the bill or reminder was sent to the wrong address.
Ask the council for:
- A copy of the demand notice
- A copy of the reminder
- The date each notice was issued
- The address each notice was sent to
- The account address history
- A breakdown of the summons costs
- The legal basis for any costs
---
Can the council charge you for attending court?
A landlord or taxpayer should not be charged simply because they attend court to make representations.
Councils do often ask the Magistrates’ Court for costs connected with the summons or liability order process.
Those costs should be lawful, reasonable, and explainable.
If a council suggests there is a charge for attending court, ask them to clarify whether they mean:
Those are different things.
---
Can landlords recharge council tax to tenants?
This is where the issue becomes difficult.
If the council bills the landlord, the landlord may want to recover the cost from the tenants.
Whether that works depends on the tenancy agreement.
A clause saying “the tenants are responsible for council tax” might not be enough.
Why?
Because that wording may assume the council bills the tenants directly.
It may not deal with the newer situation where the council bills the landlord because the property is treated as an HMO for council tax purposes.
A stronger tenancy agreement should deal with both situations:
Existing tenancies need careful review.
If the agreement is silent, unclear, or says bills are included in the rent, recovery from tenants may be difficult.
---
The Tenant Fees Act problem
Landlords also need to think about the Tenant Fees Act 2019.
Under the Act, landlords and agents in England can only require tenants to make permitted payments.
Council tax can be a permitted payment if the tenancy agreement requires it.
But landlords should be careful.
The following are risky:
- Adding an admin fee for handling council tax
- Adding a markup to the council tax bill
- Demanding a vague recharge not covered by the tenancy agreement
- Trying to recover council tax where the tenancy says bills are included
- Backdating a charge without clear wording
This is one of the biggest practical risks created by the rule change.
Shelter explains permitted payments under the Tenant Fees Act here:
Shelter: Tenant fees and other costs---
Why recharging tenants is not straightforward
Even with good tenancy wording, recharging council tax can be messy.
Common problems include:
- Tenants moving in and out during the council tax year
- One tenant being a student and others being professionals
- Tenants disputing the split
- Tenants saying they were told council tax was included
- A tenancy ending before the council bill arrives
- Deposit deductions being disputed
- One tenant refusing to pay
- The landlord being left to pursue former tenants
But landlords should not assume recovery will be easy.
---
Practical examples
Four professional tenants on one joint tenancy
The tenants are unrelated and share facilities.
The council may decide the property is an HMO for council tax purposes and bill the landlord.
If the tenancy agreement clearly allows the landlord to recover council tax from the tenants, the landlord has a stronger position.
Three tenants, two professionals and one student
The property may not qualify for a full student exemption.
The council may bill the landlord.
The student tenant may argue they should not contribute in the same way as the professional tenants.
The tenancy wording needs to explain how council tax is handled.
Tenancy says “tenants are responsible for council tax”
This may help, but it may not be enough.
The better wording is to say what happens if the council bills the landlord directly.
Tenancy says rent includes bills
This is a problem.
Unless council tax is clearly excluded, the landlord may struggle to recharge it separately.
---
What landlords should do now
Landlords should review every shared property.
Start with these checks:
---
What should agents do?
Managing agents should have a clear process.
At Purple Frog, this is the type of issue we monitor closely because it affects both landlords and tenants.
Agents should:
- Tell the council who manages the property
- Ask the council to confirm the correspondence address
- Keep call reference numbers
- Check bills at the start of the council tax year
- Keep landlords updated
- Review tenancy wording
- Challenge summons costs where the council sent notices to the wrong address
- Avoid assuming tenants are liable because the tenancy is joint and several
Questions to ask the council
If a council says the landlord is liable, ask:
---
The takeaway
The law has changed.
Some councils are applying the new rules more actively than others.
That is likely to change over time as more councils update their guidance and billing practices.
Landlords should not rely on old assumptions.
A joint tenancy does not always mean tenants are liable for council tax.
If you own shared houses, check the position now.
The biggest risks are:
- The council bills the landlord unexpectedly
- The bill goes to the wrong address
- A summons arrives before the landlord knows about the bill
- The tenancy agreement does not let the landlord recover the cost from tenants
- The landlord tries to recharge tenants in a way that creates Tenant Fees Act issues