Niall Hassard: Licensing of short-term lets - is it a sledgehammer to crack a nut?
Scottish Government has been under pressure for a considerable period of time to ‘do something’ about the alleged proliferation of short-term lets.
Those calling for restrictions often point to anecdotal instances of antisocial behaviour; a fear of the erosion of community as full time residents are replaced, and increasing house prices forcing buyers out of certain areas. This negative view is by no means universal. Many point to the positive effect of tourism and the greater flexibility short-term lets offer both businesses and leisure visitors, citing the economic benefit derived from the properties and the significant investment by owners in ensuring the properties come up to a high standard in a competitive market place. Indeed the views about the relative merits and demerits of short-term lets varies significantly between local authorities across Scotland.
Matters came to a head last year after a Scottish Government Consultation on a proposed licensing regime, the outcome of which saw a decision taken to move forward with the introduction of a new mandatory licensing system for short-term lets.
The Government decided against making the regime optional for local authorities, citing the need for uniformity in relation to standards of safety. This came as a disappointment to many local leaders who hoped to be empowered to balance the needs and concerns of their communities. The chairman of tourism body SkyeConnect said that short-term lets licensing legislation would be “hugely onerous to microbusinesses in Skye and right across Scotland.” The industry has also raised concerns, with the Association of Scotland’s Self Caterers saying up to half of their members would leave the industry as a result of the new scheme.
The draft regulations known as the Civic Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2021, were published at the turn of the year and the Government is receiving feedback on the technical aspects of the order. This regime won’t come into force overnight, with the deadline for licence applications set for 1 April 2023. In part this takes recognition of the pandemic but also the impact that processing thousands of applications and undertaking related inspections will have on local authority resource, as well as the cost to property owners in achieving compliance.
This therefore begs question – what will this new regime look like for owners?
Details are still being finalised but the central pillar of the regime will be a mandatory safety requirement. One can anticipate that it will look similar to the requirements for HMO licensed properties when it comes to things like fire, gas and electrical safety.
There will be an interplay between licensing and planning, allowing local authorities to identify control areas to ensure that planning permission is also required for the change of use of an entire property to a short-term let, in addition to obtaining a licence. It is envisaged that renting a room out to a lodger or allowing others to stay in your own home whilst on holiday will not be affected by control areas.
It is too early to say exactly what the final regime will look like, but what we do know is owners will have to pay a fee to apply for the licence, and those licensing fees will be set locally by the licensing authority.
When applying for a short-term let licence, neighbours within 20m of the applicant premises will be written to by the local authority and invited to comment. One can anticipate that in urban areas that will involve a significant number of owner/occupiers potentially coming forward and offering a view.
In addition, the order also requires display of a site notice inviting representations, again widening the pool of potential participants in the process. Issues raised will have to be debated and determined at hearings before local licensing committees, dealing with both technical compliance and the merits of the application.
The 2021 order creates an ‘overprovision’ ground of refusal for a short-term let licence. In short this means that if the local authority deems that there are too many short-term let licences in force in a particular area, they can refuse to grant any more. This could, of course, create a race to get a licence in areas with a higher concentration of short-term lets.
Finally, the Scottish Government has stated that they will be considering how short-term lets will be taxed going forward and are drawing parallels between that and the Transient Visitor Levy (tourist tax) which is likely to come into force in the upcoming parliament.
Suffice to say, this change will come as a shock to many property owners unfamiliar with the foibles of licensing, and it would be prudent to seek advice before embarking on the process. Whilst the regime is new for short-term lets it will sit within the wider licensing landscape of the Civic Government (Scotland) Act 1982, which licenses various activities from taxis to late hours catering, a process well known to lawyers in Scotland.
- Niall Hassard is legal director at UK law firm TLT