New proposals, which will allow local authorities to charge council tax on empty properties, could hit landlords hard.
Currently, an owner has a mandatory period of six months after a residential property falls empty before they have to pay council tax on it. Ministers are planning to eliminate this timeframe.
The Government is looking to replace the section of the Localism Act with a clause that would permit local authorities to charge whatever they liked on vacant properties for the first six months.
It would be their choice to charge anything, from nothing to the full 100% council tax.
After the six-month period, full council tax would be required, as it is presently.
The exact proposal would see the Class C exemption for council tax purposes eliminated.
Class C homes are vacant properties that are mainly unfurnished. Other classes, which would probably remain unaffected by the changes, include houses left empty when someone has become ill or when the property is subject to probate.
Empty Homes Targeted for Council Tax
The Government says, of the Class C group, “there is no compelling reason why the first six months should be treated generously.”1
The plans could certainly affect landlords, and also sellers who need to move quickly, for example, for work.
The proposal arrives at the same time as the Local Government Finance Bill that looks to allow local authorities to charge larger amounts for properties that are vacant for two years or more, and additionally charge double rates for second houses.
This too could hit sellers of houses that are not selling quickly, or private landlords with void periods. A spokesperson for the Local Government Association said that the plans could have “unintended consequences.”1
Local councils are largely in favour of having the power to charge what they like on recently empty homes.
In the formal discussion earlier this year, 169 councils voted for, with just 25 going against the Class C exemption being abolished.1
Just five property-related companies reacted, with three against the ideas and two for it. 70 members of the public responded, with 59 against, and only 11 for. Only one MP replied, who supports the changes.1
Local authorities should, however, bear in mind the difficulties of collecting small amounts of council tax on properties that are only empty for a matter of days.
Ian Sanford, of Pennington Homes, says: “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 dates. 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.”1