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Changes in Council Tax to add costs for landlords

Landlords are reminded that as from this week, local authorities now have the discretion to charge full Council Tax on empty properties.

The change affect properties that until now have been given automatic exemptions and discounts, including furnished and unfurnished properties for rent.

Owners of properties that are empty because of building work will also lose the automatic right to be let off Council Tax for up to a year. Many councils have decided to charge the full amount from day one.  

These are the exact changes:

    1.    Exemption class C (properties that are empty and unfurnished for up to six months) has been abolished and each council can decide whether to award a local discount in its place
    2.    Councils can decide to charge an additional premium of up to 50% on homes that have been empty and unfurnished for two years or more
    3.    Exemption class A (properties requiring or undergoing major repairs for up to 12 months) has been abolished and each council can decide whether to award a local discount in its place
    4.    The minimum discount that councils can give for furnished homes that are no one’s ‘sole or main residence’ – i.e. second homes and unoccupied furnished lets – has been reduced from 10% to 0%.

Local councils vary in their approach. For example, some are charging full Council Tax from day one, while others are allowing a short ‘grace’ period of perhaps a month and then either levying full Council Tax or a proportion of it for the next five months.

For example, Southwark Council in London is allowing empty, unfurnished properties to be exempt for two months, after which the full charge is applied. However, there is no exemption at all for empty, furnished rental properties. On properties empty for two years or more, it will charge a ‘premium’ of 50%.

Spelthorne Council is giving a one-month exemption to empty, unfurnished rental properties, and then giving a 50% discount in month two, followed by a 25% discount in month three, followed by no discount. It, too, will be charging 150% Council Tax on properties empty for over two years.

Information as to what each local council has decided should be on their websites.  The local authority in question will have to be notified promptly of empty periods – which could mean having to notify the council of an empty rental property on the day that tenants move out, even if it is going to be vacant just a very short while.

There has been speculation that landlords will raise their rents as a result. But surely a landlord faced with having to pay, say, £150 a month on an empty rental property is going to be more likely to accept a lower rent if the tenants can move in immediately?

Landlords will also have to grapple with the problem of what happens when a tenant who has given two months’ notice to leave actually quits before the end of their tenancy. Currently, most tenants would carry on paying rent until the official end of their tenancy or the property is re-let, but are let off Council Tax. This has not mattered until now, because of the automatic exemption: however, it could mean that the landlord now has to pick up the Council Tax bill immediately.

Other problems to be aware of are that some councils are taking a cumulative approach to empty properties, so that if a council is granting an initial one-month exemption, it may add up short periods of vacancy and sting the landlord with a bill for property that may have been empty for, say, six weeks in one year.

Landlords may also opt to take a more pragmatic approach to rent  if they are paying, say, £125 a month for an empty property. It may be better to cut the rent if the tenants can move in quickly.

Finally, if you are using a managing agent, it is important to discuss the issue with them, not least because of the cost implications for landlords and the importance of marketing properties efficiently before they fall vacant.

Agents should be up to speed on the subject,  with chapter and verse on the local council’s charges. You should also make sure that the agent takes responsibility for ensuring that the local authority is informed when a property becomes empty.


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