A reminder to Landlords: Beware of the pitfalls of Section 32 of the Government Reform Act 2014
29 March 2021
While Section 32 of the Local Government Reform Act 2014 (the “2014 Act”) has been in operation for a number of years, it is important for landlords to continue to bear in mind the pitfalls it poses. Section 32 provided important changes in relation to rates liabilities:
- There is now a statutory obligation on a vendor to alert the rating authority that a sale has taken place and to discharge all arrears for which the vendor is liable (i.e. six years). The rates that are not discharged are unpaid rates that will be a charge on the property for a period of twelve years. A vendor should ensure that a Section 32 Notice is issued to the rating authority on completion.
- A landlord must notify the rating authority within two weeks of an assignment.
- Landlords will be liable “for a charge equivalent to no more than two years of the outstanding rates due” from a previous tenant where (a) an assignment was not notified to the rating authority and (b) the tenant has not discharged the arrears prior to assignment.
Landlords should be particularly mindful that arrears of rates owed by a tenant can become a charge on the landlord’s interest where rates arrears are not discharged on an assignment. Such a charge can be avoided by ensuring a Section 32 Notice is issued to the rating authority within 2 weeks of an assignment or subletting. Nonetheless, a landlord should ensure all rates are discharged prior to consenting to an assignment or subletting by way of best practice.
Where a tenant surrenders a property, a landlord should ensure that a Section 32 Notice is served on the rating authority to avoid a charge on the property for up to two years of any unpaid rates.
Rating authorities invariably provide a template form of Section 32 Notice to be completed and served. It should be noted that the obligation to notify a rating authority under Section 32 of the 2014 Act is satisfied by service of a simple letter confirming the transfer of an interest in a property.