New plans are in line to give each local authority the power to charge council tax on a property as soon as it becomes empty. The new rules could hit private landlords hard and also result in a huge administrative headache.
At the moment the law states that when a property becomes vacant, the owner is granted a period of six months before any council tax becomes payable. Coalition ministers want to end this mandatory requirement and are now proposing to replace it with a clause that would allow each local authority to charge whatever they like on an empty property for the first six months. This means that they could charge nothing, which is unlikely, the full 100% council tax, or anything in between. Cash-strapped councils will almost certainly see this as a way to bolster their finances.
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.”
The proposal could clearly hit property investors with an interest in landlord insurance and it is interesting that the changes come at the same time as a much higher-profile move has grabbed the attention of private landlords. The Local Government Finance Bill going through Parliament will, when given the green light, allow local councils to charge higher amounts for properties empty for over two years; so it appears that landlords have extra incentives to ensure they keep their portfolio fully tenanted at all times.