## Council Tax Liability in HMOs and Benefit Claimants

In Houses in Multiple Occupation (HMOs), the landlord is responsible for paying the council tax (CT) bill. This cost is typically factored into the overall rent charged to tenants. However, the introduction of Universal Credit (UC) and its Housing Cost Element (HCE) has complicated this arrangement. The HCE replaces Housing Benefit (HB) for many tenants but explicitly does not cover council tax payments.

This distinction is significant because, under the Renters’ Rights Act, tenancy agreements must specify whether the tenant is responsible for paying council tax. For standard tenancies, tenants usually pay council tax directly, but this does not apply to HMOs where the landlord receives the council tax bill.

## Universal Credit and Housing Cost Element Challenges

The Department for Work and Pensions (DWP) is transitioning tenants from Housing Benefit to Universal Credit. The HCE component of UC covers rent but excludes council tax. Tenants on UC cannot use HCE to pay council tax, which remains the landlord’s responsibility in HMOs.

A practical example illustrates the difficulties tenants face: one tenant’s son, after eight years on Housing Benefit, was compelled to move to UC. His initial HCE claim was rejected due to the tenancy being labelled “contrived.” Only after a legal challenge was the claim approved five months later, during which no rent payments were made. This delay is not uncommon and can cause financial strain for both tenants and landlords.

## Legal Restrictions on Council Tax Charges in Tenancy Agreements

Government guidance clarifies that landlords can include council tax payments within the rent if this is agreed in the tenancy agreement. However, since HCE does not cover council tax, tenants on benefits may struggle to meet rent demands that include council tax.

The guidance also states that landlords cannot require tenants to pay council tax directly to them as a separate charge. This means landlords cannot ask tenants for additional payments specifically for council tax outside the rent. For HMOs, where the landlord receives the council tax bill, tenants cannot be made directly responsible for council tax payments.

## Potential Solutions for Landlords and Tenants

One proposed solution is for the rent to exceed the HCE payment, with tenants making a personal contribution to cover the shortfall. If this personal contribution equals or exceeds the council tax portion of the rent, then HCE funds are not being used for council tax. Landlords would need to demonstrate that the council tax bill has been fairly apportioned among tenants and that each tenant’s personal contribution covers their share of the council tax.

This approach raises questions about its legality and practical application. It also prompts further considerations about whether landlords can refuse tenants on benefits who cannot make such personal contributions, given that the Renters’ Rights Act prohibits discrimination based on benefit status but requires tenants to be able to pay the rent.

## What This Means for UK Landlords

Landlords managing HMOs with tenants on benefits must carefully draft tenancy agreements to comply with legal requirements while ensuring rent payments cover all costs, including council tax. They should be aware that:

– Council tax cannot be charged separately to tenants in HMOs.
– Universal Credit’s Housing Cost Element does not cover council tax.
– Tenants may need to make personal contributions if rent exceeds HCE payments.
– Delays and disputes over HCE claims can affect rent collection and property management.
– Refusing tenants solely because they claim benefits is not permitted, but tenants must be able to afford the rent.

Landlords and agents should seek legal advice when structuring tenancy agreements and consider clear communication with tenants about rent components and payment responsibilities.