The government is consulting on making mortgage lenders responsible for council tax if they have evicted borrowers from their homes. At the moment the property is usually exempted from council tax if a mortgage lender takes possession. The Council of Mortgage lenders has come out against the proposal, saying that if lenders had to pay the tax they would have to pass it on to their customers in some way.

One of the arguments raised by the CML is that the idea behind council tax is that it pays for services to be provided to local people. A mortgage lender who takes possession of a property will make very little use of council funded services. Many of our unoccupied property insurance clients would agree with this. The subject of who pays the council tax on empty houses is a complex one. If there are tenants in the property they will normally be liable for the tax but if they move out then the landlord will probably have to pay the bill.

The CML are arguing that if the government wants to collect “forgone” tax they should make the legal owner responsible for it and encourage local authorities to pursue them as debtors. The CML calculate that some 36,000 properties were taken into possession in 2010 with a similar number likely to be seen for 2011. Lenders are only allowed to take possession of a property once they have made all reasonable attempts to resolve the position with the borrower. The lenders have to comply with the Mortgage Pre- Action Protocol which says that possession is a last resort.

If you own an unoccupied property make sure you check with your local authority about liability for the council tax. Most authorities have checklists on their websites.