Thursday 26th July 2012
New plans to give local authorities power to charge council tax on homes as soon as they become empty could hit sellers and landlords hard – and give letting agents a mammoth administrative headache.
At the moment, when a domestic property falls vacant, the owner is granted a mandatory period of six months before council tax becomes payable. Ministers want to abolish this mandatory requirement.
Under the Localism Act, the Government is proposing to replace it with a clause that would let local authorities charge whatever they wanted on empty homes for the first six months.
They could if they wished charge nothing, or the full 100% council tax, or anything in between. The carrot for local councils is undeniable – they would be able to hang on to every penny.
After the first six months, full council tax would be payable, as now.
The actual proposal is to abolish the Class C exemption for council tax purposes.
Class C dwellings are empty homes that are largely unfurnished. Other classes, which would appear to remain untouched by the latest moves, include homes left empty after someone has become ill or because the property is subject to probate.
Of the Class C category, the Government says ‘there is no compelling reason why the first six months should be treated so generously’.
The proposal could clearly hit landlords, as well as sellers needing to relocate quickly– for example, to new jobs or, in the case of older people, to be closer to family.
It comes at much the same time that a much higher-profile move has grabbed the headlines. The Local Government Finance Bill, currently going through Parliament, will allow local councils to charge higher amounts for homes empty for two years or more, as well as to double rates for second homes.
While that too could also affect sellers of some homes which fail to sell quickly, and private landlords with voids – a spokesman for the Local Government Association told LAT yesterday that the proposals could have ‘unintended consequences’ – it would be nothing like as complicated as the proposal to abolish Class C.
However, cash-strapped local authorities clearly like the idea of being able to charge whatever they like on newly-empty properties.
In the official consultation this spring, they overwhelming voted in favour (169 councils for, 25 councils against) to the Class C exemption being abolished. They were not only by far the most enthusiastic, but also the group which responded most to the proposal.
Only five property-related businesses responded (three against the proposal, two for it), and just 70 members of the public, thought to be landlords. Of these, i 11 were for the idea and 59 against it. Just one MP responded, favouring the abolition of the exemption.
However, even the most eager of local authorities would have to face up to the logistics of having to collect small amounts of council tax on properties vacant for only a few days.
Ian Sanford, of Pennington Homes, in Huntingdon, said: “With local authority finances under pressure in the present recession it is more than likely that authorities will choose not to grant council tax-free periods, which will have major financial implications for landlords and vendors alike.
“In addition, it will provide an additional administrative burden for letting agents in that they will have to advise local authorities of all vacant periods, most of which are often only of a duration of a few days. It is also likely that, in these cases, it will cost the local authority more to collect the small amounts than the additional revenue achieved.”