by Alan Rehfisch, Senior Researcher, SPICe, published by the Scottish Parliament
The temporary letting of homes, flats, and other accommodation to visitors for periods ranging from a single night to several months (accommodation that has come to be known as “short-term lets”) is a long-established part of Scotland’s tourism offer. However, the emergence of major online accommodation booking platforms over the last 15 years has led to a significant increase in the number of people choosing to provide short-term lets, particularly in tourist hotspots. This increase has been accompanied by growing concerns about a loss of residential accommodation, a negative impact on community cohesion, and anti-social behaviour by a small number of visitors.
In response to these concerns and following significant consultation by the Scottish Government and scrutiny by the Local Government, Housing and Planning Committee, the Scottish Parliament approved the Civic Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2022 (“the Licensing Order”) in January 2022. This required all Scottish local authorities to introduce a licensing system for short-term lets within their area by 1 October 2022. This post outlines the key elements of this new licensing system.
What is a short-term let and who needs a licence?
The Licensing Order defines a short-term let as “the use of residential accommodation provided by a host in the course of business to a guest”. A host providing a short-term let must obtain a licence, except when:
The accommodation is the guest’s only or principal home.
The accommodation is provided to the guest free of any charge or other obligation, such as the provision of a service.
The guest is an immediate family member of the host, a school pupil or student resident for educational purposes, or an owner or part-owner of the property.
The accommodation is provided for the purposes of work or service provision, e.g. an on-site janitor’s home or room for a live-in carer.
The accommodation is provided under certain tenancy agreements.
The Licensing Order also exempts the following property types from the licensing system:
hotels.
hostels.
residential accommodation where care is provided to people in need of care.
hospitals or nursing homes.
residential schools, colleges, or training centres.
secure residential accommodation, such as prisons and young offenders institutions.
shift accommodation, that is accommodation provided by employers to employees as part of a contract or to help them perform their duties (for example, caretakers or workers on an oil rig (insofar as the accommodation is within Scottish territorial waters), where shifts extend into multiple days).
refuges.
student accommodation.
serviced aparthotels.
mobile accommodation such as caravans, motorhomes, and boats.
Exemptions extend to property which forms part of any of the above property types. So, for example, self-catering property in the grounds of a licensed hotel would also be excluded.
These exemptions apply to accommodation types that are authorised and/or regulated under existing statutory regimes
What does “in the course of business” mean?
The requirement to obtain a short-term let licence only applies where accommodation is provided “in the course of business”. The vast majority of short-term lets involve the guest(s) paying the host for their stay. The cost is usually based on the number of nights booked. However, the licensing regime does not just apply where money changes hands but to any accommodation provided for a “commercial consideration”. This is defined in the Licensing Order as covering both money and “benefit in kind (such as provision of a service, or reciprocal use of accommodation)”.
This is significant, as anyone living in Scotland who wishes to undertake a house swap must first obtain a short-term let licence.
What about Bed and Breakfasts?
Anyone operating a Bed and Breakfast must obtain a short-term let licence. Bed and Breakfast accommodation involves letting rooms within a private home, plus the provision of breakfast. The Scottish Government argues that including Bed and Breakfast accommodation within the licencing regime ensures a level playing field, requiring anyone that lets out rooms within their only or principal home (regardless of whether they offer breakfast or not) to obtain a licence. This ensures that guests can be confident all such accommodation complies with the relevant safety standards.
Does the licensing scheme only apply to commercial holiday properties?
No, the licensing regime also applies to occasional lets of a hosts’ only or principal home, and/or the letting of rooms within such a home while the host is resident. To reflect this, the licensing scheme differentiates between three types of short-term let arrangement:
Home sharing: Guests stay in a part of a host’s only or principal home, while the host is resident.
Home letting: Guests stay in a host’s only or principal home, while the host is absent.
Secondary letting: Guests stay in accommodation that is not the host’s only or principal home.
A licence will normally cover home sharing/letting OR secondary letting, but not all three.
What are the aims of the Scottish short-term let licensing system?
The policy note, which accompanies the Licensing Order, outlines the aims of the licensing system as follows:
The Licensing Order establishes a licensing scheme to ensure short-term lets are safe and address issues faced by neighbours; and to facilitate local authorities in knowing and understanding what is happening in their area as well as to assist with handling complaints effectively.
Is the licensing scheme already in operation?
Yes, the Licensing Order came into effect on 1 March 2022. This sets out three key dates:
All new hosts have had to apply for a licence since 1 October 2022 and, while they can advertise their accommodation, they can only take bookings and receive guests once their licence is granted.
Existing hosts, who let their accommodation prior to 1 October 2022, have until 1 October 2023 to apply for a licence. They can continue to operate while the local authority considers their application.
All short-term lets falling into the above categories need to be licensed by 1 January 2025.
Under the legislation, licensing authorities have up to 12 months to process applications for existing hosts and nine months for new hosts. This time can be extended in individual cases through application to a court.
What about accommodation during one-off and major events?
Major one-off events, such as international sporting championships, and annual cultural highlights, such as the Edinburgh festivals, require large spikes in visitor accommodation availability. A significant amount of this additional capacity is provided by residents offering their only or principal homes as short-term lets during such events. The Licensing Order provides two possible options for authorising the temporary use of such accommodation for limited periods of time. These are:
Temporary exemptions: A local authority can grant a temporary exemption from the requirement to hold a licence for short-term letting for a single, continuous period not exceeding six weeks within any period of 12 months. Local authorities set out their approach to temporary exemptions, which can include never offering such exemptions, in a policy statement, e.g. Glasgow City Council states that:
Given one of the reasons behind STL [Short Term Let] legislation being introduced is to ensure basic safety standards are in place across all STL and the applicant is a fit and proper person to hold the licence, the Committee agrees on this basis, that no temporary exemptions will be granted…The Licensing Authority may however, grant temporary exemptions for national events within Glasgow.
Temporary exemptions are not granted automatically, a host needs to apply for an exemption. The local authority will charge a fee for processing an application for an exemption and can attach conditions to any award of an exemption.
Temporary licences: A local authority can choose to issue temporary short-term let licences, with a maximum duration of six weeks, or longer if an application for a full licence has also been submitted – in which case, the temporary licence can last until a decision is reached on the application for a full licence.
How much does a licence cost?
The cost of a short-term let licence is set by individual local authorities, with the charge typically being based on the type of licence and the maximum occupancy of the accommodation being licensed. Licence fees must be set on a cost recovery basis, meaning they must only cover the costs incurred by authorities in running their licensing schemes.
Fees are typically in the region of £300 to £500, although they can be as low as £125 for a home-sharing licence for up to four guests in the Glasgow City Council area, and up to £5,869 for a secondary let that can accommodate 21+ guests in the City of Edinburgh Council area.
How long does a licence last?
The exact duration of a licence is a matter for individual local authorities. Licences can last for up to three years, which is the typical duration of most licences.
What conditions are attached to a licence?
The Licensing Order includes several conditions that apply to licenses issued by all Scottish local authorities, known as “mandatory conditions”. These include:
ensuring a property meets the repairing standard.
has an Energy Performance Certificate, where required.
has adequate fire and carbon monoxide alarms.
has an up-to-date gas safety certificate.
has electrical installation condition and portable appliance testing reports.
has appropriate buildings and public liability insurance.
Local authorities can also impose additional conditions.
Short-term let licensing and the planning system
Does using an entire existing house, flat or other accommodation as a short-term let need planning permission? Planning permission is normally needed when a proposed new building, extension, conversion or change of use falls within the statutory definition of development, which is:
…the carrying out of building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land.
For short-term letting purposes, the key question is whether using an entire existing property as a short-term let represents a “material change in the use”. Whether planning permission is required will be dependent on national and local policy, plus factors unique to the property in question. Ultimately, this is a decision for the relevant planning authority.
Letting rooms within a host’s only or principal home never needs planning permission.
Planning permission is automatically required for the use of an existing dwelling house for the provision of short-term lets from the point of designation of a short-term let control area, which can be designated by a planning authority. The only Council to have designated a short-term let control area to date is the City of Edinburgh Council. Highland Council has approval from Ministers to designate Badenoch and Strathspey as a control area but is yet to announce the designation date. Planning permission may not be required in a control area where a short-term let has been in continuous operation for ten years or more.
What are the implications of the judicial review of the Edinburgh short-term let licensing policy?
Several businesses involved in the letting, management and promotion of short-term lets challenged the legality of specific aspects of the City of Edinburgh Council’s short-term let licensing policy at the Court of Session. Lord Baird issued a judgement on 8 June 2023, which found that certain aspects of the Council’s policy were unlawful. In very brief terms, these were a presumption against granting licences for secondary lets in tenements, a presumption against granting temporary licences for secondary lets, a requirement for secondary lets to have carpets fitted in bedrooms, living rooms and hallways, and the Council’s approach to handling applications for licence renewals.
Cammy Day, Leader of the City of Edinburgh Council, responded to the ruling by stating:
"I’ve received today’s judgement and am pleased that we’ve been successful in defending large parts of our policy. While I’m obviously disappointed that the court didn’t find in favour of our policy on secondary lets, I make absolutely no apology for seeking to protect our residents…The court acknowledged our intention to find a solution to this and agreed that it was legitimate to use both planning and licensing policy. We welcome the clarity provided and will now consider our next steps in more detail."
Fiona Campbell, Chief Executive of the Association of Scottish Self Caterers responded to the ruling by stating:
"The impact of this will not be confined to the capital as the decision has ramifications for licensing schemes across Scotland. The Scottish Government need to go back to the drawing board on short-term let regulation and engage constructively with industry to provide a regulatory framework that works for all stakeholders. The time to act is now and the ASSC has pragmatic, fair and proportionate policy solutions which can assist."
The Minister for Housing wrote to the Scottish Parliament’s Local Government, Housing and Planning Committee on 28 June 2023 about short-term lets, including the result of the judicial review, stating that:
…the JR [Judicial Review] challenge was specific to the City of Edinburgh Council’s implementation of the short-term let licensing scheme, it was not a challenge to the licensing scheme itself. It remains our view that licensing of short-term lets can be operated effectively by councils so as to respect the rights of hosts and guests in short-term let accommodation, and is appropriate for the whole of Scotland.
The letter goes on to highlight that the Scottish Government is liaising with licensing authorities about the outcome of the Judicial Review and that there will not be an extension to the 1 October 2023 application deadline for hosts who were operating prior to October 2022.
Alan Rehfisch, Senior Researcher, SPICe https://spice-spotlight.scot/2023/07/27/licensing-of-short-term-lets/
Editor's Note:
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