Regulation of short-term lets in Scotland

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Johane Murray
Brodies, Glasgow
johane.murray@brodies.com

Catherine Reilly
Brodies, Glasgow
catherine.reilly@brodies.com

The Scottish government has confirmed that it will introduce a new licensing system for short-term lets in spring 2021. Details have still to be announced but here we make comments on what we know so far.

Background

The meteoric rise of short-term letting all over the world through platforms such as Airbnb has brought with it both benefits and burdens for local communities. The increased number of visitors in certain areas has been a boost to the local economy, with many supporting businesses such as pubs and cafes opening or expanding to cater for the increased footfall. On the other side of the coin, there have been complaints from local residents about the high turnover of people occupying neighbouring properties and, in some cases, the resulting anti-social and security issues, in addition to concerns surrounding the adverse effect on housing supply in some areas.

In its 2018 Programme for Government, the Scottish government undertook to ensure that local authorities have the appropriate regulatory powers to ‘balance the needs and concern of their communities with wider economic and tourism interests’. There is a fine balance to be struck. Airbnb in its response to the 2019 Scottish Government Consultation on Short-Term Lets reported that visitors using Airbnb accounted for five per cent of the total number of visitors to Scotland in 2016 and boosted the economy by more than £1.5m per day.

The consultation

Having held stakeholder events throughout the country and commissioned research on the effects of short-term lets, the Scottish government then consulted on a regulatory framework. The consultation expressed a desire to avoid catching occasional stays with friends and family. It identified three different types of arrangements that could potentially be regulated:

• ‘sharing’ – where the guest shares the accommodation with the host;
• ‘swapping’ – where the whole of the property usually lived in by the host is let by the guest, often with the host spending their holiday in the guest’s home; and
• ‘secondary letting’ – where the whole of the property occupied by the guest is not the home of the host and the host is absent.

More than 1,000 responses to the consultation were received. This is (in relative terms) a significant response to a government consultation and underscores the importance of the issue for some. Most respondents called for some form of regulation to be introduced and for distinctions to be made between the different types of short-term let.

Licensing

The city of Edinburgh attracts the most visitors in Scotland with about 831,000 in 2018 but those numbers are not reflected across the country. In recognition of the fact that a one-size-fits-all system would not work, local authorities are to be given the power to implement a licensing system that works for their area. In the words of the government: ‘Local authorities are to be given new powers to regulate short-term lets where they decide this is in the interests of local communities.’ The need for a licence to operate short-term lets therefore will differ depending on in which part of the country the property is situated.

No detail has yet been given on how a scheme might operate or whether it will distinguish between different types of letting. It has been confirmed that the scheme will be introduced under the Civic Government (Scotland) Act 1982, the legislation originally used for the licensing of houses in multiple occupation (HMOs) in Scotland (Part 5 of the Housing (Scotland) Act 2006 now deals with HMOs).

The aim of a licensing scheme is to give local authorities more information and understanding of what is happening in their area and to improve safety and the handling of complaints. Mandatory safety requirements will be introduced for all types of short-term let with any licensing scheme, but we are yet to understand if there is to be any requirement to mirror the physical and fire safety standards to be met under the HMO system. Local authorities are also to be given the discretion to apply further conditions to licences to address specific issues in local areas such as littering and overcrowding. When it comes to the cost and duration of licences, given that local authorities are to decide how a licensing scheme will work in their area, the duration and cost of a licence are likely to differ between different authorities, as is the case with HMOs.

Planning

At present there is no certainty in Scotland as to when a property used for short-term lets requires planning permission. It is for the relevant planning authority to decide on a case-by-case basis whether planning permission is required for a material change of use from a residential use to, for example, short stay commercial visitor accommodation use. The City of Edinburgh planning authority has used this power more recently, but other local authorities have used it very sparingly.

In addition to the power to introduce a licensing scheme, there will be a new power to designate control areas within which planning permission will be required for change of use when the entirety of a property is being used for short-term lets. Home-sharing arrangements where someone rents a room in their own home or lets others stay in their home when they are on holiday are to be exempted from the planning requirements.

The new planning requirements will be aimed at controlling ‘tourist hotspots’; City of Edinburgh Council is already consulting on whether it should introduce controlled areas for the whole or parts of the city. The planning controls will be available to local authorities by spring 2021 and will bring more certainty to the position.

Tax

The government has also undertaken to review the taxation of short-term lets, a separate exercise from the introduction of a transient visitor levy (tourist tax). We are told that the proposed tourist tax will complement the short-term lets system. The government proposes to give local authorities the power to charge such a levy on overnight visitors, with the condition that any revenue is spent on tourism-related activities, news welcomed by local authorities but not by holiday accommodation providers. Draft legislation is expected to be issued at some point during the present year.

Conclusion

And so, Scotland is still open for business on short-term letting. It will be allowed to continue in a more controlled manner which will protect both guests and local residents and will favour those who operate their properties in a proper and considerate manner. The government has sought to be mindful of the needs of both residents and visitors and is allowing local authorities to implement a system that will cater for their local demands and needs. This will mean that those operating across the country will have to familiarise themselves with the relevant rules and regulations, but we would expect that, as with the HMO system, all necessary information will be made readily available.

The short-term letting regulations are due to come into force in spring 2021. We will continue to monitor progress and issue updates whenever they become available.