Will consultation on short-term lets lock some doors?

In a recent round-table discussion of hot topics in Scottish property law, keen interest was sparked by the Scottish Government’s consultation on a regulatory framework for short-term lets.

The breadth of opinion voiced reflects that there are diverse interests to be considered when putting short-term lets under the legal microscope. These range from portfolio property investors to local residents and to those revellers who seek a ‘party flat’ while in town. It is a topical and contentious issue.

It can be argued short-term lets of residential properties (whether arranged through Airbnb or otherwise) attract tourism and generate economic benefits for the host landlord and local services. However, in recent years, local residents, particularly in parts of Edinburgh, have expressed concern about the negative impact on their local neighbourhoods where the number of short-term lets has significantly increased.

It is against this background that the Scottish Government has committed to ensure that local authorities have appropriate regulatory powers to balance the needs and concerns of their communities with the wider economic and tourism interests. The consultation (link below) closes on 19 July 2019 and invites responses on issues, including:

• The definition of “short-term let” for which there is currently no statutory definition in Scotland. The term is widely used but the meaning varies according to the context, including non-domestic rates and capital gains tax. Recognising occasional friends and family stays, the consultation suggests that the starting point for defining “short-term let” should be one where accommodation is available for let for a cumulative period of 28 days or more in any rolling period of 365 days.
• The positive and/or negative impact of short-term lets. In addition to the points referenced earlier, short-term lets can provide flexibility for contract workers or people moving into an area. A short-term let can also help owners generate income from their property while on holiday. Conversely, the consultation recognises that such lets can negatively impact on community cohesion and introduce an element of risk to the personal safety of hosts, guests and other residents from unverified/unknown users of the property.
• The impact of short-term lets on the housing market. Scotland has a well recorded housing shortage and, arguably, a focus on investment in short-term lets further reduces the supply of available housing for long-term let or purchase by occupiers.
• The restrictions imposed on short-term lets by planning law in Scotland. The current law lacks clarity on this point. Planning permission may be required for a change of use from residential to short-term letting but only where the change of use is material. Materiality is a matter of fact and degree for the relevant planning authority to consider on a case-by-case basis.
• There is an opportunity to resolve this ambiguity with the Planning (Scotland) Bill which is due to be debated at stage 3 in the Scottish Parliament on Tuesday 18 June.  At stage 2, an amendment was introduced which seeks to make it clear that using a property to provide short-term holiday lets involves a material change of use for which planning permission is required. Exceptions would apply for the host’s sole or main residence and residential lettings. This amendment would need further definition and guidance but the Scottish Government does supports its intention. In the wider context, however, the Planning (Scotland) Bill has been much amended and criticised and we will be following next week’s debate with interest. 
• Powers to tackle antisocial behaviour caused by short-term lets and create a complaints system.
• Health and safety requirements for short-term lets with the aim of achieving parity across all short-term rental accommodation when it is not the owner’s primary residence.
• The tax treatment of short-term lets, including non-domestic rates, income tax and the possible introduction of a tourist tax.
• A proposed national framework which empowers councils to establish a regime which is suitable for their locality. This may involve a registration scheme where the host is required to submit information about themselves and their property. At present, it is difficult to gauge the true extent of properties let in this way as there is no universal requirement for hosts to register with their local authority. A council seeking further control, may do so through a licensing scheme where the host is required to register and then meet ongoing licensing conditions.

The range of interests affected help make this consultation a talking point. We will continue to track the outcome of the consultation and its relationship with the Planning (Scotland) Bill and keep you updated. Please do get in touch if you would like more information.