The Valuation Tribunal found that the rooms were separate hereditaments and that, whilst tenancies to occupiers existed, the tenants were in rateable occupation of their respective rooms and so liable to pay the tax for that room. The landlord appealed to the High Court.
Each of the rooms within the HMO contained an en suite bathroom with a shower and a toilet. The rooms each have a lockable door and are let out to a separate tenant on an assured shorthold tenancy (“AST”). In addition to their exclusive use of their individual rooms, each of the tenants also enjoyed a licence to use the common areas of the House on a shared basis. Those common areas included communal living, dining and kitchen areas.
The sole issue was the number of rateable units which were comprised in the House, applying relevant rating principles.
The High Court noted that as a matter of rating law, it is legally impossible for a single hereditament to contain discrete parts which are occupied by different persons.
The High Court made five points as follows:
- First, each individual room is capable of being a discrete unit, as it is capable of physical definition by virtue of its four walls and lockable door;
- Second, each of the individual rooms has its own separate rateable occupier, being the individual tenant who resides in the room and has the benefit of the AST for the room. No other person makes any actual use of, or has any physical presence in, the room, including the other residents in the House or the Appellant himself. No other person has any right to enter the room, let alone on an exclusive basis, including the other residents of the House or the Appellant himself.
- Third, each Room is thus capable of definition as a “hereditament” and is in discrete rateable occupation.
- Fourth, on the established principles in Cardtronics [i], Prosser [ii] case and other case law, each room is thus a discrete rateable unit
- Fifth, the fact that each tenant needs to use the common parts to access their room and makes use of a shared social and kitchen area is not relevant.
The Rooms are separately tenanted. The High Court agreed with counsel for the LO that it is hard to think of a clearer example of an exclusive occupier of a space than a tenant exercising a right of immediate possession.
Accordingly, council tax was payable for each room in the HMO.
Conclusion – is council tax payable in a HMO?
This case has relevance to any issue as to whether, and by whom, council tax is payable concerning an HMO.
This decision follows up the Prosser case and, although concerned with council tax rather than business rates, it will be relevant to business rates disputes concerning the extent of any unit of property which may be liable to assessment for rates.
[i] DMH Stallard acted for one of the successful business ratepayers in this Supreme Court case
[ii] See our 4 February 2025 legal insight
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