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Council Tax (Variation for Unoccupied Dwellings) (Scotland) Regulations 2013 [Draft]
Council Tax (Adminstration and Enforcement) (Scotland) Amendment Regulations 2012 (SSI 2012/338)
Council Tax (Exempt Dwellings) (Scotland) Amendment Order 2012 (SSI 2012/339)
Items 2 and 3 are subordinate legislation. Item 2 is oral evidence from the Minister for Housing and Welfare and Scottish Government officials on an affirmative instrument: the draft Council Tax (Variation for Unoccupied Dwellings) (Scotland) Regulations 2013. In the interests of efficiency, I propose that, at the same time, the committee take evidence from the minister under item 3, which is two negative statutory instruments: the Council Tax (Administration and Enforcement) (Scotland) Amendment Regulations 2012 (SSI 2012/338), and the Council Tax (Exempt Dwellings) (Scotland) Amendment Order 2012 (SSI 2012/339). Motions to annul both those instruments have been lodged by Margaret Mitchell. Members have papers setting out the purpose of all three instruments, as well as a copy of the instruments.
The Council Tax (Variation for Unoccupied Dwellings) (Scotland) Regulations 2013 will allow local authorities to impose a council tax increase of up to 100 per cent for homes that have been empty for one year or longer. They will also allow councils to offer a discount of between 10 and 50 per cent for homes that are unoccupied for between six months and a year. The increase will not apply to second homes. The regulations define a second home as one that is not someone’s main residence but which is furnished and occupied for a minimum of 25 days a year.
Carry on, please, minister.
It would make little sense to give councils the power to apply a council tax increase and not give them the tools that they need to implement it. The negative instruments will help councils to apply the council tax increase effectively. They will oblige owners to provide councils with the evidence that they need to identify whether a property is liable for an increase. They impose a maximum penalty of £500 for non-compliance and they include provisions to prevent an owner from avoiding the increase by claiming repeated exemptions.
Thank you very much, minister. I invite Margaret Mitchell to speak to the SSIs and to her motions to annul the negative instruments.
First, the minister has come to the committee to move the motion to approve the draft Council Tax (Variation for Unoccupied Dwellings) (Scotland) Regulations 2013, which will enact the Scottish Government’s policy on unoccupied domestic property rates relief, for which the Local Government Finance (Unoccupied Properties etc) Act 2012 paved the way. I am speaking against the motion to approve the draft regulations and for the motions in my name to annul the negative instruments. Do you want me to give my reasons just now for doing so, convener?
Yes, please.
The Local Government Finance (Unoccupied Properties etc) Act 2012 is a piece of legislation that should never have seen the light of day, as it is based on false premises and questionable propositions. It assumes that the majority of property owners, both domestic and non-domestic, keep properties empty out of choice and it does not acknowledge that they may be empty because of a fundamental lack of demand that is due to the current economic climate.
Do members have any questions or comments?
This is an important piece of legislation that incentivises owners of unoccupied properties to make them available to either the rental or the purchase market.
Thank you, Mr Stevenson. We seem to have moved into a debate rather than asking questions, but I am not going to stop members from doing that.
I do not disagree with the overall principle of the legislation, as something needs to happen to bring properties back into use. During the passage of the bill, I tried to amend the bill to make the charge up to 50 per cent. Are you saying that you aim to put it up to 100 per cent?
Yes. We are saying that councils can apply a charge of up to 100 per cent. That got support from stakeholders. It does not mean that councils have to apply a 100 per cent charge, but they are able to do so.
And that would be at the discretion of each and every local authority.
The local authorities make that decision.
Who would be monitoring that?
Local authorities make that decision based on what they want to do with those properties and what policy they have decided on. It would be up to local authorities to apply a charge that they felt was appropriate for their area, and it is up to their members to monitor those policies.
I welcome these instruments and understand that no policy can deal with every possible eventuality.
I will pass that question to the legal team.
The new regulations will replace the 2005 regulations in their entirety. The 2005 regulations will therefore apply up to the date that the new regulations come in. The new regulations will take over from that point. If somebody has taken an appeal to a valuation committee, for example, and won an argument against the council under the old regulations, I presume that that will inform what they are entitled to under the new regulations, but they will be dealt with under the new scheme, from the date the regulations come in.
My second question is about the word “occupied”. This may sound pedantic, but I ask for a definition or clarification of that word. My reason for asking is that I have a constituent whose household currently does not live in their house. They live in rented accommodation because a number of things happened, and they have spent a considerable amount of money trying to renovate their property. That has gone on for longer than six months; indeed, it has gone on for a number of years. There have been delays in finalising the work due to ill health in that time. From time to time, one member of the family spends a night in the house, which is not furnished, apart from a couch. That person goes to the house late at night, sleeps in it overnight, and goes to the rented accommodation when they wake up in the morning. There, they get ready, eat and do whatever. Will you clarify what the word “occupied” means?
An occupied dwelling is the sole or main residence that someone lives in, and an unoccupied dwelling is clearly not the sole or main residence that someone lives in. A second home is defined as one that is lived in for 25 days a year and is furnished. On the circumstances that you have outlined, if the property has been unfurnished and unoccupied as a main residence for 12 months or more, it would be defined as an unoccupied dwelling. I think that my definition is correct.
Obviously, local authorities will determine how they apply a charge or an increase in a charge, but that is what an unoccupied property is.
Obviously, we have agreed in principle on unoccupied properties. An amendment was lodged to the Local Government Finance (Unoccupied Properties etc) (Scotland) Bill that related to the variation and the level to which the local authority could charge. As my colleague Anne McTaggart said, that amendment was lodged to make the charge up to 50 per cent. In response to my colleague’s question, you said that the local authority would monitor the variation. Surely it would be in the Government’s interests to have an assessment of how the regulations will work. Will you request that an assessment be submitted to the Government?
The Government will monitor what happens, as it monitors any of its policies. We monitor the council tax, so we will monitor what happens, but it will be up to the local authority to determine what is appropriate in its area. The whole purpose is that the legislation has flexibility in how local authorities apply it so that they can use it to the best advantage in their area. We will certainly be aware of what is happening in every area, and we will consider that.
But if that monitoring shows that the regulations are not working, will the Government review the situation?
I am not sure what you mean by “not working”. It is discretionary for local authorities whether they use the regulations and how they administer them. It is for them to decide the benefit of the regulations to their area. Although we would look at the overall picture throughout Scotland, there is flexibility for local authorities in this legislation.
With regard to the discretion for local authorities, is it an all-or-nothing power? For example, if a house should remain empty for a year or more, and a local authority uses its discretion to apply 50 per cent for the first year, would that continue or can the local authority revisit it and start charging 100 per cent?
Local authorities will look at the legislation and determine the policy that is appropriate for their area. The legislation does not allow them to pick out individual houses and say, “We’ll apply it there and we won’t apply it there.” It allows them to look at areas of low demand and classes of housing and determine how best to use the legislation in their area. There is flexibility and discretion for local authorities, which we envisage them using. They will determine how much of the legislation they want to apply. However, it is not the case that they will apply 50 per cent one week and change it the following week. I think that local authorities are aware of that.
The assurance that you are giving the committee is that, when a local authority sets a variation within the 100 per cent, it will not change from week to week or from year to year.
It should not change from week to week, although there is discretion to change it as a local authority reviews its policies and procedures. Any local authority should review how it applies any legislation and consider whether it should be amended. However, the variation will not be amended weekly or monthly—it should apply for at least 12 months.
After 12 months, the local authority can go back and review it.
It may wish to do that. I think that I am correct in saying that that is perfectly appropriate. Some may leave it longer.
Good morning, minister. A number of issues have been raised by colleagues. Stuart McMillan talked about the 25-days-a-year minimum for the occupancy of a second home. Paragraph 2 on page 2 of the policy note says:
As we have said, we are providing guidance for all local authorities, which they will be able to use in looking at the issue. In the situation that you describe, the appeal concerns whether a home is unoccupied. If a property was occupied for 25 days and was furnished, that would determine that it was a second home. As you say, any dispute would concern that.
You might want to clarify this but, if I picked you up correctly, you are saying that another determination of whether a second home qualifies as a second home might take place. That determination would be by the valuation appeal board, which might override a decision by a local authority on whether a second home qualified as a second home. Are you saying that, irrespective of the evidence that a local authority asked for to show that a second home was being used as a second home, any appeal to the valuation appeal panel might overturn the council’s determination of what a second home is?
We consulted the valuation boards, which were happy with what we put forward.
The issue concerns the assessment of the evidence that is presented and whether that justifies a decision. If a liable person—a taxpayer—is unhappy with the view that a council reaches, they have a right to appeal that and seek a determination from an appeal body.
I am sorry for labouring the point, which relates to a difficulty in having 32 local authorities. The issue arises particularly when local authorities border each other and are under the same valuation board’s jurisdiction but the evidence that one local authority determines that it requires differs from that which a neighbouring local authority requires.
We are saying that the valuation panel will look at the evidence that the home owner provides and at the evidence that the local authority provides and requires. The panel’s assessment will be based on that evidence.
I seek clarification about the properties that will be exempt from full council tax. Paragraph 10 on page 2 of our cover note on the regulations gives a list of reasons for exemption. I readily accept exemptions for people who are
When a lender repossesses, until the property is sold or auctioned, the original owner of the property is still liable for the council tax for that property. The liability does not transfer the minute the property is repossessed. From my previous experience, I think that I am correct in saying that, until a property is sold, the liability remains with the original owner. If there is equity in the property, any liabilities would be paid out of that. Generally, when properties are repossessed, there is negative equity in them. If you are suggesting that the lender should perhaps pay the council tax, I do not know whether we can do that, but we certainly might look at it.
There are separate regulations that deal with dwellings that are totally exempt from council tax, but I do not have them with me. As the minister suggested, there are two types of repossession situation. One is where a lender is working with someone to try to sell a property and another is where a lender physically takes over a property for sale, perhaps because the person has disappeared or because the situation has not been resolved. There is certainly provision in the existing exempt dwellings regulations that take such properties totally out of the council tax system for a period. However, I am afraid that I simply do not have the details of those regulations with me, because the new system does not affect the existing exemptions that underlie the council tax system. The existing regulations, which are from 2005, sit on top of that.
Minister, thank you for your insight into where my question was leading. Many people who have their homes repossessed continue to be liable for the council tax that accrues. It would have been useful to tidy up the situation through this subordinate legislation to remove the burden of further debt on people who have already had their homes repossessed. Although we cannot change the legislation that is before us, I would like to think that you will take that point on board and will try to remedy the situation as quickly as possible, to ease the burden of on-going debt when a person is not using a property.
A number of members are waiting to ask a question. Stuart McMillan has a supplementary question.
It relates to John Wilson’s earlier questions. I seek clarification from my colleague and from the minister. My understanding of their discussion was that it was about the criteria that are to be laid down for the local authority and the valuation board. That is my take on what was discussed, but I am not sure whether that is the case. Are the criteria for the local authority and the valuation board to be the same when deciding on whether a property has been occupied for 25 days?
Yes.
I want to pick up on the minister’s use of the word “sold”, which of course implies that there is a transfer of value between seller and purchaser. I wonder whether, in fact, the minister was seeking to tell us that the clock returns to zero when there is a transfer in the registration of who owns a particular property—when the ownership of a heritable asset transfers from one person to another, without consideration of whether that is by selling, the application of a charge over the property or whatever. I just want to be clear about what triggers changes in the circumstances around the property and whether the clock starts again on transfer of ownership. The word used was “sold”, but I do not think that that was correct.
Perhaps I used “sold” when I should have used “transfer”. As John Wilson said, when the property transfers, the original owner has liability until the property is transferred to a new owner, not necessarily the lender that repossesses it.
Yes, whereas, of course, the continuing liability for council tax that the previous owner—not the current owner—might have under the terms of their standard security is entirely another issue, and one that has been explored thoroughly by John Wilson.
I ask the minister to clarify the impact on rates relief of the ability to provide proof of actively marketing to sell and proof of actively marketing to rent.
In terms of council tax?
Yes.
If a property is being advertised through the normal procedures that are undertaken by someone who is trying to sell their home, that would be taken as evidence that the home was being actively marketed.
Just to be clear, it is not the case that relief is triggered automatically when someone is marketing to sell but is discretionary in cases when someone is marketing to rent.
No. If you are actively marketing to sell or to rent, the relief should be triggered. I think I am correct in saying that—
Yes.
I was beginning to doubt myself.
One of the regulations moves the point at which eligibility for exemptions kicks in from six weeks after a rental period or period of occupation begins to three months. Does that not provide a disincentive to people to accept short-term rents and, therefore, does it not work against the stated policy intention?
We do not think that that is the case. Most short assured tenancies would run longer than three months—six months would be usual.
But would someone not be more likely to refuse a six-week rental in the hopes of getting one that was longer than three months, as they could find themselves in a worse position? If that happened, that would go against the policy intention.
I do not agree with that. At the moment, if a house has been unoccupied and is then occupied again for a period of six weeks, the owner can get the exemption again. What we are saying is that, if it is occupied for three months, the exemption applies.
But it would not apply after six weeks, so people would be looking for a longer period of rental and would perhaps reject the six-week rental.
If it were rented out for six weeks, whoever it was rented to would be liable for the council tax on that property, as it would be their sole or main residence.
But thereafter the exemption would not apply.
It would not apply for three months.
That seems to me to be a disincentive, but I think that we will agree to differ on that point.
Yes.
You indicated that the guidance that will be issued to local authorities will advise them how to measure whether someone is actively marketing to sell or rent. How will the guidance instruct local authorities on determining whether someone is genuinely actively seeking to rent or sell a property as opposed to trying to avoid doing that by setting a property value or rental value way above what would be expected in the market?
Colin Brown will respond to that.
That situation is covered in the regulations, which provide that one of the factors to be considered in determining whether the property is being appropriately marketed is the proposed price or rent. Knowing the local circumstances, the authority will need to consider that point and assess what would be reasonable in the local market.
Thank you for that clarification.
Further to John Wilson’s and Margaret Mitchell’s questions, would there be a difference between someone trying to sell their property through an estate agent and someone trying to sell their house on their own to avoid paying an estate agent? I think that an estate agent might sell a house quicker than someone trying to sell a property on their own.
I know that many folk would disagree with you.
The test is whether someone is genuinely seeking to sell. We are not suggesting that the sale would need to be via an estate agent or some other agency. The requirement is that the house is genuinely on the market. Some people who are advertising their house themselves can show that they genuinely have the house on the market, although most people eventually revert to an estate agent to get their house sold. There is no hard-and-fast rule on that. The issue is whether the owner is genuinely trying to sell the house or property.
I will ask the final question, which is on the attitude of COSLA and local authorities to the proposals. Are COSLA and local authorities happy with the flexibilities that the Government is providing in the legislation?
Yes, local authorities and COSLA have welcomed the flexibility. A number of local authorities have indicated to me that they are happy with the flexibility that they will have in using the legislation.
Thank you very much.
As no member wishes to speak in the debate, we will move to the vote.
There will be a division.
The result of the division is: For 4, Against 3, Abstentions 0.
Agenda item 5 is the debate on motion S4M-05393, which seeks to annul the Council Tax (Administration and Enforcement) (Scotland) Amendment Regulations 2012 (SSI 2012/338), on which we have just taken oral evidence.
As no member wishes to speak in the debate, we will move to the vote.
There will be a division.
The result of the division is: For 1, Against 6, Abstentions 0.
Item 6 is consideration of motion S4M-05394, in the name of Margaret Mitchell, which seeks to annul the Council Tax (Exempt Dwellings) (Scotland) Amendment Order 2012 (SSI 2012/339), on which we have just taken oral evidence.
The question is, that motion S4M-05394 be agreed to. Are we agreed?
There will be a division.
The result of the division is: For 1, Against 6, Abstentions 0.
I thank the minister and her officials for their time and suspend for five minutes to allow for a changeover of witnesses.