Rates Review not Highly Rated

In a briefing to the Assembly’s Committee for Finance & Personnel on 5th June 2013, Housing Rights Service warned that proposed changes contained in the Department for Finance & Personnel (DFP)’s Review of Rates Liability for the Landlord Sector will not make much of a difference to our clients.

Housing Rights Service is concerned that tenants will still be unfairly pursued for rates bills even when they can prove they already paid for this in their rental payments.  Rating liability in the private rented sector (PRS) is complicated.  Responsibility for paying rates can lie with the landlord or the tenant, depending on the capital value of the property and how frequently rent is paid.

The proposals in DFP’s consultation aim to simplify the rules governing rate liability in the PRS.  Unfortunately, we do not believe that these proposals do enough to address this issue.

Detailed discussions with stakeholders needed

We believe that the proposals contained in the DFP consultation can only be a stop-gap measure in sorting out this issue and that detailed discussions should be held with key stakeholders to review how the collection and payment of rates are administered in the PRS.

There is no simple solution to this issue.  Making landlords responsible for collection and payment of all rates, as is the case for Houses in Multiple Occupation (HMOs), may mean that tenants on low income no longer receive assistance with rates payments through housing benefit.  It could also lead to an increase in monthly rent charges across the sector.

We would like to see an assurance that tenants are not prosecuted for rates liability where it can be proved that they have made rates payments to their landlord in line with their tenancy agreements.

Who is legally responsible?

Liability for rates in Northern Ireland is governed by the Rates (NI) Order 1977. Article 18 of that Order makes the occupier of any property that appears on the valuation list liable for paying rates.

Privately rented properties are also subject to Articles 20 and 21 of the Order. Article 20 transfers liability from the occupier (tenant) to the owner (landlord) where the following conditions apply

• the Net Annual Value of the property does not exceed £750
• the capital value of the property is less than £55,000
• the capital value of the property is less than £150,000 and the rent is paid at intervals shorter than quarterly
• the property is a HMO
• parts of the property are let out as separate lodgings

Article 21 of the Order allows a landlord to assume responsibility for payment of rates by entering into a voluntary arrangement with Land & Property Services (LPS).  Landlords who sign up for an Article 21 agreement will get a discount on their total rates bill.

A further complication to this convoluted system is found in Schedule 8 to the 1977 Order.  Even if the landlord/owner is liable to pay rates under the criteria in Article 20, they may not have to do so if there is a term in a contract/tenancy agreement which states that the rates will be paid instead by a ‘specified person’ i.e. normally the tenant.  A landlord can therefore transfer liability to a tenant/s via the rent collected under the tenancy agreement.

The legislation also includes the provisions of Article 23 (Liability of occupier for rates unpaid by owner) and Article 24 (Recovery of rates from tenants and lodgers) where the occupier/tenant becomes responsible for the payment of rates if the owner or landlord fails to make this payment or is in arrears.

It is apparent that rating liability in the PRS is needlessly complex.  However, DFP’s proposals to simplify the system by removing the frequency of rent payment criterion from Article 20 do not do enough to adequately address this problem.

Housing Rights Service experience of advising private tenants on rates issues

• Tenants generally often presume that rates are included in their monthly rent payments.
• Tenants generally expect the tenancy agreement to explain whether they are required to pay rent.  They are not generally aware of the provisions of the Rates Order.
• Schedule 8 of the 1977 Order creates confusion and obscures whether liability for rates is determined by rating legislation or contract law.
• Most tenants don’t understand how a property’s capital value can impact on their liability for rates.  This information is generally not brought to people’s attention when they are searching for a rental property.
• Most landlords include an amount towards rates in each monthly rental payment and specify this in the tenancy agreement.  In cases where the landlord does not pass this money to LPS the tenant will be pursued by LPS despite having already paid the landlord. The tenant’s main form of redress is to sue the landlord for the return of the money paid to her/him.

Find out more

Rating legislation as it currently stands is confusing and many people are unaware of their liability to pay rates.

Government accepts that the current rules have proved to be complicated to administer and difficult to understand. We agree. Unfortunately the proposals in DFP’s consultation will do little to remedy this problem.  We believe government should convene a wider consultation exercise to find a long term solution to this problem.

Read our Briefing to the Committee for Finance & Personnel in full or watch us on Democracy Live.