Supreme Court refuses to hear case on council tax position where tenant moves out

The Supreme Court has refused to grant Leeds City Council permission to appeal a key ruling over whether landlords are responsible for paying council tax on a property when a tenant has moved out before the tenancy agreement has formally ended.

A panel of three judges – Lord Neuberger, Lord Carnwath and Lord Hodge – concluded that permission should be refused because the application did not raise an arguable point of law.

The issue before the Court of Appeal in Leeds City Council v Broadley (Rev 1) [2016] EWCA Civ 1213 was whether Mr Broadley or his tenant was "the owner" of the appeal dwelling within the meaning of section 6 of the Local Government Finance Act 1992 ("the 1992 Act") when that dwelling had no resident for the period in dispute.

In the Court of Appeal Lord Justice McCombe said the form of agreement used was “of a type that has been in common currency for as long as today's practitioners in the law of landlord and tenant will be able to remember and, as the authorities cited by counsel for the intervener show, for even longer than that”.

The appeal judge set out Leeds’ position as follows:

“6. The Council contends that, in the circumstances which happened, the question of the identity of the owner "depends on whether it is legally possible to have what has been described as a 'continuation tenancy' namely a single property interest comprising of [sic] both a fixed and periodic term": replacement skeleton argument for the appeal, paragraph 3. The Council argues that that is not possible; the tribunal and judge have held to the contrary. The Council said in its written argument for the appeal (through Ms Bretherton QC and Mr Crossley) that the type of tenancy purportedly created by the agreement offends against the rule that requires tenancies to be of sufficiently certain duration and which, if contravened, means that the purported tenancy is beyond the power of a landlord to create. The emphasis of the argument shifted somewhat, in Ms Bretherton's helpful submissions during the hearing, away from the certainty issue, to the question of whether the type of hybrid tenancy appearing on the face of the agreement could exist as a single grant in the light of the provisions of the Law of Property Act 1925.

7. Refining the Council's argument further, it is said that this form of tenancy agreement can only be construed in one of three ways: 1) as fixed term, followed by a periodic tenancy under the Housing Act 1988; 2) as a monthly periodic tenancy with a fetter on termination for the period of 6 or 12 months; 3) if intended as a truly single tenancy comprising two terms, it cannot be a tenancy at all, as this is legally impossible; it must, therefore, be a contractual licence.

8. On this basis, says the Council, in case 1) the tenant would be liable to tax for the period of occupation pursuant to the periodic tenancy (s.6(2)(b) or (e)) and if he vacated before the end of the fixed term (s.6(2)(f)). In case 2) the tenant would be liable during the period of occupation as before, but not after, leaving the property as he had no material interest as the periodic tenancy is not a leasehold term of 6 months or more. In case 3) the tenant is liable during his occupation under s.6(2)(d), but not thereafter. At all other times the landlord would be liable for the tax.”

The landlord argued that the contract created a single tenancy whose term was six months and thereafter continuing as a monthly tenancy. This would have the same effect as a fixed term assured shorthold tenancy.

The Residential Landlords Association, which intervened in the case via written submissions from Arden Chambers’ Justin Bates, said the tenancies in question were contractual periodic tenancies following a fixed term.

Mr Justice Edis in the High Court ruled that the council tax liability remained with the tenant rather than the landlord. The judge said the tenancy agreement in question did not offend against the uncertainty rule.

The Court of Appeal held that a tenancy which demises land for a fixed period and continuing thereafter on a monthly basis takes effect as a single term and not as two separate tenancies.

Concluding that the council tax liability remained with the tenant, Lord Justice McCombe said: “In essence…..I agree with the solution to the present problem arrived at by the Tribunal and by the judge.”