Can Investors Avoid Paying Council Tax Empty Homes Fees?

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Can Investors Avoid Paying Council Tax Empty Homes Fees?

According to a recent news post on LandlordZONE, Medway Council issued a retroactive council tax bill to investors purchasing previously empty properties, applying a 200% empty home council tax premium.

This situation has highlighted key challenges – and confusion – for property investors and those sourcing deals, when navigating information during transactions.

We have outlined the case reported and potential impact for sourcing agents and investors – following concerns highlighted by NAPSA Members.

What Happened in Medway?

Medway Council reportedly charged new property owners significant council tax fees, linked to the long-term vacancy status of the properties they’ve purchased:

Maxine Forthergill

Purchased two derelict flats for renovation and was given a £10,500 council tax bill for previous periods of vacancy. Her case pushed her to appeal to the Valuation Office Agency (VOA), which eventually ruled in her favour.

Azid Gungah

Experienced a similar issue after acquiring flats, some of which had been vacant for two years. His initial appeal was reportedly ignored, and the charges were waived a day before his scheduled court appearance.

Medway Council stated that according to The Ministry of Housing, Communities and Local Government; the vacant property premium is calculated based on the period of the vacancy, not the change in ownership. This means the liability can transfer to the new owner if the property is still habitable.

What Does This Mean For Investors?

The empty homes council tax premium raises significant due diligence concerns for anyone involved in property sourcing or deal packaging – not to mention investors actually purchasing properties. By Medway Council issuing these penalties, it’s become clear that more due diligence and clarity across the property sector is required.

Material Information Disclosure

The number of councils applying similar premiums is unclear, and something we are looking into, however one thing is clear – sourcing agents will need to increase their material information checks to cover unpaid council tax bills and highlight the possibility of potential fines, before presenting deals to an investor.

Failing to assess whether a property is unoccupied early on, or in council tax arrears, could leave investors with an unexpected bill and agents at high risk of being taken to court for compensation should they not declare information which was readily available to them about those arrears.

Renovation Projects

Many investors purchase vacant properties as renovations or “refurb” and “flip” projects. Council tax liabilities could make these projects less attractive if there are challenges or delays in acknowledging a property’s inhabitable status.

It comes down to research and awareness of habitability of the property before purchase. If there’s any chance of a fee being handed out by the council, an investor will very likely want a reduction on the property sale price – or walk away from the deal altogether.

What Can Investors and Sourcing Agents Do to Mitigate Risk?

The good news, is that both investors and sourcing agents can take proactive steps to avoid any unpleasant surprises. It will add a little extra time to checks, but worth doing to avoid potential costs.

Sourcing Agents: Enhance Due Diligence During Searches

  • Verify if the property has been vacant and for how long
  • Confirm with the local council whether any council tax liabilities exist
  • Check whether the vacant property qualifies as uninhabitable, as this could exempt it from council tax premiums (subject to Valuation Office Agency (VOA) rulings)
  • Communicate with your local council and build a positive working relationship – it can pave the way for smoother resolutions should something occur.
  • Share all of these Material Information findings with your investor when presenting the deal, so that they are aware at the earliest point in the process.

Investors: Know Your Legal Rights

It’s important investors (and sourcing agents) familiarise themselves with local council tax policies and laws, particularly around vacant property premiums. If you have any doubt, we recommend you seek legal advice before moving ahead with any property deals.

Future Material Information Updates?

We have reached out to The National Trading Standards and Letting Agency Team ( NTSELAT) for guidance on how sourcing agents, deal packagers and property investors can safeguard themselves against potential council tax empty homes premiums, and whether as part of Material Information gathering, councils need to make empty home data and council tax arrears easily accessible.

We will also be conducting research on which councils across the country are following the empty home premium and what their individual terms are, so we can help forewarn sourcing agents and investors operating in those areas.