Empty homes and a new Council Tax bite – no April fools joke

27 Mar 2013

A not so welcome Easter gift, and certainly no April fools joke. As a result of the Local Government Finance Act 2012 Local Authorities have been given flexibility to vary some Council Tax exemptions and discounts in order to help Councils meet their budgetary challenges, as well as discourage long-term empty homes.

From Monday 1st April, Local Authorities will have the discretion to charge full Council Tax on empty properties. How each Council will exercise their discretion will be different, and so some may decided not to alter the exemptions, some may lead in with a grace period, others may assert their discretion and some may charge the full amount from day one.  How effective Councils are in managing their budgets already may play a part.

The change will affect properties that have currently been given exemptions and discounts, including second homes.

The specific changes are as follows:

1.  Properties which are ‘empty and unfurnished’ for up to six months has been abolished.

2.  A discretion to charge an additional ‘premium’ of up to 50% on properties which have been ‘empty and unfurnished’ for two or more years.

3.  Properties requiring or undergoing major repairs for up to 12 months has been abolished.

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.

Here are some examples from Councils – taken from their websites which should be a first port of call in cases of concern:

  •   Borough of Poole – 2nd homes and those empty (either up to or over 6 months) full charge; premium of 50% extra Council Tax added to those empty and unfurnished for more than 2 years.
  • Wiltshire Council – empty/ unfurnished up to 6 months (3 months at 100% exemption, 3 months at 50% exemption), after 6 months 100% charge. Those requiring or undergoing structural alteration or major repair and substantially unfurnished and unoccupied may be entitled to an exemption for up to 12 months (3 months at 100% exemption, 9 months at 50% exemption). It can only be exempt if it has been in need of or undergoing such works for less than 12 months.
  • Southwark Council – Empty/unfurnished first 2 months exempt, thereafter 100% charge. Over 2 years 150% charge. 2nd homes and unoccupied furnished lets 100% charge.

There is unlikely to be any impact on the work of conveyancing solicitors as part of the conveyancing process – other than perhaps to remind clients when commenting on the Property Information Form Section 6 that the seller’s Council Tax is not necessarily what the buyer will pay.

As for estate agents managing properties for rent, some may need to take responsibility for notifying Councils of empty properties. There is also speculation that landlords may raise their rents to cover periods where properties may be in between tenants but Council Tax has to be paid while standing empty. The converse argument might be that tenants can now offer less than the asking rent, as landlords may be tempted to accept that than leave their empty property incurring Council Tax. Possibly the same for houses for sale?