RLA policy director David Smith explains the case and its implications
The Appeal Court has ruled landlords are not responsible for paying council tax on properties when a tenant moves out before their tenancy agreement has expired, following a lengthy court battle between Leeds City Council and landlord Stephen Broadley.
Leeds City Council had demanded council tax for five properties owned by Mr Broadley, for periods when the homes were empty but the tenancies had not been formally ended by either party.
He successfully defended himself in court and against two subsequent appeals.
What is it about?
It is not uncommon for tenants in periodic tenancies to simply disappear part way through a month giving the landlord little or no notice.
Tenants are not in fact allowed to do this and legally-speaking they must give the landlord not less than four weeks’ (for a weekly tenancy) or one month’s (for a monthly tenancy) written notice which expires at the end of a rental period – the day before the rent is due.
Often tenants leave having failed to do this and sometimes leaving the landlord with arrears of rent too.
To add insult to injury many local authorities then also chase the landlord for the council tax that the tenant should have paid during the notice period.
In some cases the first time the landlord realises the tenant has actually left is when the local authority writes chasing the council tax.
Why does this happen?
Council tax is payable in normal circumstances by the person occupying a property.
However, it is not quite that simple and there is a hierarchy of those who have to pay, with the owner of the property sitting at the top.
A local authority works its way up the hierarchy until it finds someone who is liable to pay.
Lower down the chain are two key entries. The first is a tenant who has an interest in the property which exceeds six months.
Most tenants in a fixed term tenancy will fall into this bracket as they will have been granted a fixed term AST for six months or a year. This means that a tenant who leaves part-way through their fixed term will remain liable for the council tax even if they abandon the property unless the landlord takes back control of the premises. Lower down the hierarchy still can be found a tenant who is resident in the property who has an interest in the premises which is less than six months.
Because a tenant with an interest of less than six months is liable for council tax only while they are resident, if they leave the property for whatever reason then they will not be resident and will not be liable for council tax.
The local authority will then move down the hierarchy to find the next person who is liable for council tax, usually the landlord. It is this distinction between tenants who have an interest of more than six months and those who have an interest of less than six months which is at the heart of the Broadley case.
In a previous case it had been held that a tenant for six months whose tenancy had then continued as a statutory periodic tenancy did not have a sufficient interest during their periodic tenancy.
This meant that when this tenant left the property during the periodic tenancy the landlord was liable for council tax immediately.
The reason for this was that the court held that a statutory periodic tenancy was a new tenancy and so the tenant’s interest in the property was only from month to month.
Mr Broadley had done something slightly different.
He had written his tenancy agreement so that at the end of the fixed term the tenancy would continue as a periodic tenancy.
This was as a matter of contract rather than as a statutory periodic tenancy.
Mr Broadley therefore was of the view that as his tenant had an ongoing relationship which had started as a six month tenancy and was continuing as a periodic tenancy rather than a new periodic tenancy commencing once the fixed term had ended.
Leeds City Council was seeking to argue that the continuation of the tenancy as a contractual periodic tenancy was not legally possible and that it should be treated as a periodic tenancy which had started afresh at the end of the fixed term tenancy.
The local authority was making the point that while this was not a huge amount of money for Mr Broadley it would end up being a lot of money for Leeds City Council as they would be unable to collect money unpaid for a large number of properties where tenants had left without paying final council tax instalments.
When Leeds appealed to the Court of Appeal they approached lawyers that the RLA had contact with to see if they would assist Mr Broadley.
The RLA took the view that this case was of interest to landlords as a whole because the sums of money involved, while small to each landlord, would be substantial when added across a large number of landlords.
We therefore decided to get involved in the case to argue the legal points alongside Mr Broadley. The Court of Appeal agreed with the RLA arguments and took the view that a periodic tenancy which continues on a contractual basis is different from a periodic tenancy which has arisen by way of statute.
Therefore landlords who are allowing tenancies to become periodic at the end of the fixed term may want to look at the way they do this and word them to ensure that the periodic tenancy arises by way of a contractual provision in the tenancy agreement.
The RLA will be looking at its own tenancy agreements to see how this can best be done.
The Landlord’s Story
Stephen Broadley spent a ‘horrendous’ two-and-a-half years doing battle with Leeds City Council. Here he explains why it was important to prove his ‘point of principle’.
It is the David v Goliath case that has given hope to all those landlords out there facing a closed door when disputing council tax issues with local authorities.
It was back in 2014 that Leeds landlord Stephen Broadley was charged £120 for a couple of weeks’ council tax on an empty property.
He could have just written the cheque, marked it down to experience and moved on.
But the 63-year-old believed these charges were unfair and made the decision to challenge the council on it.
This decision had far reaching consequences; bailiffs at his door and a two-and-a-half year legal battle which saw him represent himself in some of the highest courts in the land.
In the end he was vindicated, with the Appeal Court in London upholding a High Court and Valuation Tribunal decision, that he was in the right all along.
Mr Broadley, a chartered surveyor, said the last two years have been ‘horrendous’ and estimates he has spent at least 300 hours fighting the case. Not to mention financial outgoings.
He said: “It has been horrendous. I got the council tax bill and disputed it as I didn’t believe it was my liability.
“This was all going through the system when two bailiffs turned up at my home. At first the council told me it was a mistake, then I was called back and told it wasn’t and I ended up having to pay them £520 just to go away.”
After a Valuation Tribunal found in his favour, he was horrified to discover the council was appealing. He said: “In my view this should have been the end of the matter.
The whole point of the Valuation Tribunal is to resolve disputes regarding conditions of council tax.”
When Leeds appealed the case at the High Court, appointing a QC and a barrister, Mr Broadley represented himself. When this failed the city council took the case to the Court of Appeal in London. This too failed.
Mr Broadley said: “The whole thing dragged on for more than two years and I am still out of pocket. I have yet to recover the money I paid to the bailiffs, which the council said I would have to pursue with the company they employed.
“This claim is still ongoing and will need to be dealt with in the County Court.
“For fear of ending up paying the city council’s legal fees if I lost – which was always a possibility – I had to sign a paper saying I wouldn’t claim my own costs if they found in my favour, meaning I have been unable to claim anything back for all the time lost fighting this or the expenses incurred.
“I feel Leeds Council was most aggressive and intimidating in the way it dealt with me from the start. However I am glad that I did this.
“Most landlords that I know reacted with complete disbelief when Leeds kept appealing. Some have asked whether it was worth it, but to me this was a matter of principle and I wasn’t going to give in.
“I just hope that the result in this case gives hope to other landlords who may be fighting similar battles elsewhere.”