Council Tax - Meaning of 'Owner'

Liability for Council Tax is imposed by the Local Government Finance Act 1992 ('1992 Act'). In the 1992 Act, the important sections for England and Wales on the imposition of liability are those in a group of sections called 'Liability to tax', that is, sections 6 to 9 inclusive, with the key section being section 6, entitled ‘Persons liable to pay council tax’. Section 6 of the 1992 Act '...sets out a hierarchy in order of priority of those who will be liable to pay council tax in relation to a chargeable dwelling. They apply in sequence. The default position, being the sixth and final category in the hierarchy (s.6(2)(f)) is the "owner" of the dwelling.' (Khan v v Sandwell MBC [2017] EWHC 2481 (Admin), Michael Fordham QC sitting as a deputy High Court Judge, paragraph 6). Categories one to five apply to where there is a 'resident' of a (chargeable) dwelling, but, as stated, the sixth and final category in the hierarchy, imposes liability for council tax on the 'owner' of the (chargeable) dwelling - the focus of this article. That there is a hierarchy, and how the hierarchy is to be approached, is set out in section 6(1), with section 6(2) of the 1992 Act containing the hierarchy itself. Section 6(2) reads:

'A person falls within this subsection in relation to any chargeable dwelling and any day if, on that day-

(a) he is a resident of the dwelling and has a freehold interest in the whole or any part of it;

(b) he is such a resident and has a leasehold interest in the whole or any part of the dwelling which is not inferior to another such interest held by another such resident;

(c) he is both such a resident and a statutory, secure or introductory tenant of the whole or any part of the dwelling;

(d) he is such a resident and has a contractual licence to occupy the whole or any part of the dwelling;

(e) he is such a resident; or

(f) he is the owner of the dwelling.' [bold added]

(a sister article considers this hierarchy in detail)

Section 6 does not apply to all situations however. Parliament recognised that there will be range of situations for which separate provision may need to be made, by statutory instrument. Section 8 of the 1992 Act, entitled 'Liability in prescribed cases', enables a statutory instrument to be made, to deal with such situations (called 'prescribed cases'). A statutory instrument has been made, namely, the Council Tax (Liability for Owners) Regulations 1992/551 (which has been amended from time to time, the latest being 1.12.23) (the '1992 Regs'). The 1992 Regs set out 6 prescribed cases (known as 'Classes'). Section 8(1) and (2) read (so far as material)[1]:

'Subsections (3) and (4) below shall have effect in substitution for section 6 ... above in relation to any chargeable dwelling of a class prescribed for the purposes of this subsection.

Subsections (3) and (4) below shall have effect in substitution for section 6 ... above in relation to any chargeable dwelling of a class prescribed for the purposes of this subsection, if the billing authority so determines in relation to all dwellings of that class which are situated in its area.'

Section 8(3) then reads:

'Where on any day this subsection has effect in relation to a dwelling, the owner of the dwelling shall be liable to pay the council tax in respect of the dwelling and that day.' [bold added]

Owner - Preliminary Points

As to the meaning of 'owner', a couple preliminary points can be made:

(1) where there is more than one person falls into the definition of 'owner', each person will be jointly and severally liable to pay the council tax for the dwelling for the relevant day(s). This is the effect of, respectively:

(a) for section 6 situations, section 6(3) of the 1992 Act, which reads:

'Where, in relation to any chargeable dwelling and any day, two or more persons fall within the first paragraph of subsection (2) above to apply, they shall each be jointly and severally liable to pay the council tax in respect of the dwelling and that day.'

However, section 6(3) is disapplied in certain circumstances, as set out in sections 6(4), 6(4A) and 6(4B)[2].

(b) section 8 situations (i.e. the prescribed cases), section 8(4) of the 1992 Act, which reads:

'Where on any day two or more persons fall within subsection (3) above, they shall each be jointly and severally liable to pay the council tax in respect of the dwelling and that day.'

However, as with section 6(3) above, section 8(4) of the 1992 Act is disapplied in certain circumstances, as as result of section 8(5) applying sections 6(4) and 6(4A)[3].

(2) section 8(6) of the 1992 Act enables the statutory instrument to provide a different person to be liable for council tax, in relation to a prescribed case.

'Regulations prescribing a class of chargeable dwellings for the purposes of subsection (1) or (2) above may provide that, in relation to any dwelling of that class, subsection (3) above shall have effect as if for the reference to the owner of the dwelling there were substituted a reference to the person falling within such description as may be prescribed.'

There are two prescribed cases (Classes), where section 8(6) power has been used and the 'owner' reference in section 8(3) has been substituted for a different reference. Those two prescribed cases (Classes) are:

(a) Class C - entitled 'Houses in multiple occupation, etc'[3a]

(b) Class E - entitled 'Ministers of religion'[3b]

For chargeable dwellings falling into either of these two Classes, the reference to 'owner' in section 8(3) is substituted, for a different reference:

(a) for Class C - entitled 'Houses in multiple occupation, etc' - by paragraph 2A of 1992 Regs, which reads:

'(1) In relation to a dwelling within Class C in regulation 2, section 8(3) shall have effect as if, for the reference to the owner, there were substituted a reference to-

(a) the person who has a relevant material interest which is not subject to a relevant material interest inferior to it; or, if there is no such person-

(b) the person who has a freehold interest in the whole or any part of the dwelling.

(2) In paragraph (1), “relevant material interest” means a freehold or leasehold interest in the whole of the dwelling.'

(b) for Class E - entitled 'Ministers of religion' - by paragraph 3 of 1992 Regs, which reads:

'In relation to a dwelling within Class E in regulation 2 where a minister of the Church of England is the inhabitant and the owner of the dwelling and is in receipt of a stipend, section 8(3) of the Act shall have effect as if, for the reference to the owner. there were substituted a reference to the Diocesan Board of Finance of the diocese in which the dwelling is situated.'

Owner - Statutory Definition

Section 6(5) of the 1992 Act contains a definition of 'owner', a definition that applies to all sections in Part I of the 1992 Act (a Part entitled 'Council Tax: England and Wales'). Part I contains sections 1 to 19 of the 1992 Act, so it includes, section 6 and section 8 of the 1992 Act. Section 6(5) of the 1992 Act reads (so far as material)[4]:

'In this Part, unless the context otherwise requires-

“owner”, in relation to any dwelling, means the person as regards whom the following conditions are fulfilled-

(a) he has a material interest in the whole or any part of the dwelling; and

(b) at least part of the dwelling or, as the case may be, of the part concerned is not subject to a material interest inferior to his interest;'

Material Interest

Section 6(6) of the 1992 Act contains a definition of 'material interest', which reads:

'“material interest” means a freehold interest or a leasehold interest which was granted for a term of six months or more;'

(a) 'Freehold interest' and 'leasehold interest' refer to freeholds and leaseholds, the absolute property interests (ignoring commonhold).

(b) For leaseholds interests, not every leasehold will be a 'material interest'. To be a 'material interest' the leasehold interest must also meet the qualifying requirement: that the leasehold interest was '...granted for a term of six months or more'.

(i) Whether or not a leasehold interest has been '...granted for a term of six months or more' where there is a rolling periodic tenancy (following a fixed term) has caused some complex issues (discussed below) - but this will be only relevant where the person liable for council tax on the hierarchy is liable as 'owner' under (s.6(2)(f)). If the rolling tenancy leaseholder is a 'resident', this will not arise. The issue arises when a rolling leaseholder vacates without terminating (or otherwise bringing to an end) the rolling lease.

(ii) for Class C dwellings - 'Houses in multiple occupation, etc' - this is one part where the definition of 'material interest' (strictly speaking 'relevant material interest') differs as between: (I) the standard definition of 'material interest'; and (II) the Class C definition of 'material interest'. The Class C definition of “relevant material interest” means 'a freehold or leasehold interest in the whole of the dwelling'. There is no qualifying condition for leasehold interests, that they must have been '...granted for a term of six months or more'

Tenurial Ladder - No Rungs lower 

Property titles can be seen as operating a different levels. The top level is always the freehold (ignoring any, effectively academic discussion, about a historic feudal level above that). There is always a freehold at the top level; and the freehold can only appear at the top level. There can never be a freehold below the top level. Below the freehold/top level, there can only be leasehold interests. There can be any number of levels of leasehold interests below the freehold. There does not have to be a second level, or third level etc, but there can be. So, there can just be the top level, or just the top level and the second level, or the top level, second level, and third level etc. Ad infinitum. This is called the 'tenurial ladder' (each steps (i.e. level) being a 'rung' on it), or sometimes called the 'tenurial chain' (each segment (i.e. level) being a 'link' on it)

Where there are more than 1 level with a material interest on/in it, the words 'is not subject to a material interest inferior to his interest' denote which of the material interests, will be the pertinent material interest for the purpose of identifying the 'owner'. The words 'is not subject to a material interest inferior to his interest' mean the pertinent material interest, is the material interest, at the bottom of the tenurial ladder (the last 'rung' on the 'tenurial ladder'; or, to use the 'tenurial chain' language, the last link in the tenurial chain). So, if there are 3 levels, a freehold, a (head) leasehold, and a (sub) leasehold, each of which are a 'material interest', the 'owner' for section 6 and 8 of the 1992 Act (not relevant for Class C or Class E), is the person holding the (sub) leasehold. The 'owner' is not: (a) holder of the freehold; nor (b) the holder of the (head) leasehold[5].

Rolling periodic tenancies

Where there:

(a) is nobody who qualifies as a 'resident' of the dwelling, and so liability may fall on the 'owner' under section 6 of the 1992 Act, or the 'owner' is liable under section 8 (not Class C or Class E); and 

(b) is, at the lowest rung on the tenurial ladder, a leasehold interest, which was a fixed term tenancy (leasehold and tenancy can be used interchangeably), which then became a rolling tenancy thereafter, 

consideration will need to be given to whether, the rolling periodic part, is, or forms part of, a leasehold interest which was '...granted for a term of six months or more'.

Relevant authorities seem to be:

(1) Macattram v Camden LBC [2012] EWHC 1033 (Admin); [2012] RA 369; [2012] 4 WLUK 6 (QBD (Admin)), High Court (HHJ Robinson, sitting as a High Court Judge) on 2.4.12.

(2) CT v Horsham DC [2013] UKUT 617 (UT (AAC)), Upper Tribunal (Administrative Appeals Chambers) (Charles Turnbull) decision on 4.12.13[6];

(3) Leeds City Council v Broadley [2016] EWCA Civ 1213; [2017] 1 WLR 738 (CA (Civ Div)), Court of Appeal (McCombe LJ; Underhill LJ; Sir Stanley Burnton) decision on 6.12.16;

(4) Khan v Sandwell MBC [2017] EWHC 2481 (Admin) ('Khan'), High Court (Michael Fordham QC sitting as a deputy High Court Judge) decision on 13.9.17.

It suffices, to set out a quote from Khan, in relation to what was decided in Broadley. In Khan, the deputy High Court Judge said, at paragraphs 34, and 39 to 40:

'The second of the two issues in the case relates to limb (f) of s.6(2), "owner of the dwelling", and in particular "material interest" defined as for present purposes "a … leasehold interest … granted for a term of six months or more" (s.6(6)). The question with which the Tribunal had to grapple was whether the tenant after 25th November 2015, not having terminated this tenancy properly, was an owner having a leasehold interest "granted for a term of six months or more" that was still extant. It had not been terminated.

...

I interpose to deal at this stage with some observations so far as the law is concerned. Ultimately, the points as raised and argued in this case turn squarely on the 1977 Act. In the case of Broadley...the Court of Appeal considered the position where a term of a leasehold interest of six months or more then becomes a periodic term whether it is month to month or some other period. What the Court of Appeal emphasised was as follows. If there is a tenancy which as a matter of its proper construction involves a single grant of months certain then continuing from month to month, that hybrid tenancy will satisfy the limb (f) test (term of six months or more) including at the period where the month to month continuation has taken place. That is the conclusion at para.19 in the judgment in Broadley. The critical point is that there has been, in those circumstances, only one single grant of a leasehold interest and that leasehold interest is of six months or more viewed overall. That was the case in relation to the tenancy agreement that the court was considering in Broadley .

The Court of Appeal distinguished other situations where a term becomes a periodic tenancy, but by virtue of a new tenancy either because a contractual term has expired and the conduct of the parties reflects a new tenancy arising, or because a term has expired and a periodic tenancy arises by operation of statute. The key paragraphs are para.26 and para.27 in Broadley, discussing previous cases of those kinds. So, where there is a new tenancy and the previous six months or more term has expired, the focus is squarely on the new tenancy which will need to meet the statutory definition (leasehold interest granted for a term of six months). It is not open to a landlord to say that the new tenancy is derived from a term which had more than six months or more, and it is not open to a landlord to say that cumulatively the new tenancy has endured for six months or more. All of that can be seen from the summary in para.26 of a previous case called Macattram v London Borough of Camden [2012] RA 369. I mention that because it is legally significant to have in mind when a term giving way to a statutory or other periodic tenancy may not trigger the definition of material interest under limb (f).'

Beneficial Interest

In NR v Maldon DC [2019] RVR 323; [2019] 7 WLUK 856; [2020] CLY 1292, Valuation Tribunal (J Rockliff; M Bhatti) decision on 25.7.19, it was held that being beneficiaries to the estate of a deceased person (as well as executors of the estate), which contained X property, did not mean that they held a 'material interest' in the X property. In any event, X property was exempt under Council Tax (Exempt Dwellings) Order 1992 art.3 Class F.

This followed ZT v Lewisham LBC [2019] RVR 295; [2018] 2 WLUK 846, Valuation Tribunal (Mr G Garland) decision on 6.2.18. It is a decision which, with respect, is not easy to follow. It relates to whether the dwelling was an exempt dwelling (and so not a chargeable dwelling) under s.4 of the 1992 Act. In turn, the issue was whether the dwelling fell into Class F of The Council Tax (Exempt Dwellings) Order 1992 SI 1992/558). For Class F to apply, (amongst other things) the following must exist: 'no person is a qualifying person in respect of the dwelling' (where 'qualifying person' means 'a person who would, but for the provisions of this Order, be liable for the council tax in respect of a dwelling on a particular day as the owner, whether or not jointly with any other person.' (paragraph 10))

At paragraph 14, the tribunal judge said '...I cannot find any legal of [sic] beneficial interest which would satisfy the provisions of the legislation for a material interest...'. ['legal of beneficial interest' should, in the author's view, be read as 'legal or beneficial interest']

Seemingly, on the facts, the alleged taxpayer (Mr ZT; appellant/son of the deceased Mr DT) did not hold legal or beneficial interest in the subject dwelling. Neither by:

(a) reason of Mr ZT providing the purchase money to his father, during the father's lifetime, for his father to have purchased the dwelling (paragraph 5). Mr ZT was not a joint owner (paragraph 14); the money provided by Mr ZT to his father Mr DT was a loan or a gift (paragraph 14); nor 

(b) Mr ZT's likely inheritance of the estate, including the subject dwelling. The tribunal judge said, at paragraph 8 '...the property is in limbo within the estate of the late Mr D T. Given that the estate has not been wound up the legal and beneficial interests have not passed.' and later, at paragraph 14: 'Whilst in due course Mr Z T is most likely to have a material interest, that being the freehold of the dwelling, he simply did not for the period in dispute. At best he may have had a beneficial interest, but certainly no freehold interest in the dwelling'

The implication is that having (only) a beneficial interest in a freehold, does not amount holding a 'freehold interest' for the purposes of determining whether somebody had a 'material interest'. Though this raises the question, why say '...I cannot find any legal [or] beneficial interest which would satisfy the provisions of the legislation for a material interest...'. (paragraph 14) if a beneficial interest would not, anyway, be sufficient to amount to a 'material interest'?. 

Having said that, in the author's view, where there is a beneficial interest, there must be a legal interest to which the beneficial interest 'links; to. So, the issue will be, who holds that legal interest in the relevant property title, for the purposes of the 'material interest' test?

SIMON HILL © 2025*

BARRISTER 

33 BEDFORD ROW  

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