Land law responses to the sharing economy: short-term lets and title conditions

I have an article in Issue 4 of the 2017 Juridical Review, the law journal of the Scottish Universities. Here is the abstract:

Short-term lets of land are not a new phenomenon. In contrast, the processes by which many short-term lets are advertised and arranged are decidedly modern, making use of internet platforms in a way that allows accommodation providers and customers to conclude deals quickly, remotely and with relative ease. This opportunity, and the related increase in short-term lets in some neighbourhoods, brings certain challenges. Alongside any public regulatory response to those challenges, traditional land law devices, namely title conditions, might play a role. The nature and effectiveness of that role will depend on the applicability and enforceability of real burdens which commonly occur in residential areas, which will dictate whether they can be used by residents who have been affected by a neighbour’s proximate, problematic short-term letting activities.

UPDATE – JANUARY 2019 – The article is now available on an open access basis, here.

In the article, I note that online platforms like Airbnb (other platforms are available) can link individuals who would not normally be able to contact each other in a (generally) safe, trustworthy and reliable way and in turn can offer accommodation providers an income stream that would not otherwise be available in relation to underused assets. Offering flexible accommodation at competitive rates to those who need it might in turn bring money the local economy where the let property is. That is the positive case for short-term letting, but I also note there can be issues.

By this I am not looking at problems experienced by hosts or guests, albeit I refer to instances where things have gone a bit awry, such as the reported usage of Airbnb to facilitate theft and an alleged sexual assault by a “superhost”. (In passing, I also note this recent and creepy report about hidden cameras being positioned within Airbnb accommodation, which appeared too late for me to reference.)

The article looks at problems neighbours might have with an increased amount of short-term letting in an area. This blog post is not the place to rehearse all the various perspectives here – my article has some discussion about this and suitable references, I promise – but in summary there are perceptions that dedicating accommodation in traditionally residential areas to short-term accommodation might change the character or appeal of a neighbourhood, and also that those who make short-term use of accommodation may care little for the long-term good of the neighbourhood.

In terms of more tangible issues a stream of short-term occupants might bring, this could include incremental contribution to wear and tear, including for common areas shared by the let property or its surroundings (even well-behaved holidaymakers bring an increased number of opportunities for suitcases to be bashed and scraped off door frames and steps, which would be an issue in many Scottish tenements). There is also the possibility of reckless or deliberate nuisance (particularly noise). The lack of concern about dirtying one’s own nest removes a factor that might otherwise self-police longer term occupiers, plus (and in contrast to more traditional temporary accommodation) there is often no-one on hand (like hotel staff or a resident B&B host) to directly regulate problematic behaviour. This can also be coupled with the fact even well-meaning short-term guests are at times pretty ignorant about the area in which they are staying, especially on a first visit. Granted, this is less of a problem in the internet-age and attentive hosts will provide a proper briefing or even meet guests, but again short-term lets can bring a level of faff not witnessed in traditional hotels. (*Although I did not mention this last point in the article, I offer a personal anecdote about faffing, from my recent trip to the USA, below.)

Some of these factors will be of ongoing interest to neighbours in an area. Some of these will be of interest when a neighbour comes to sell: there is a wider debate to be had as to the effect a preponderance of short-term let property will have on the housing market, but this is not the place for it.

Public responses

Certain areas outwith Scotland have reacted to short-term letting with a direct regulatory response: the places I mention in my article that do (or plan to) control short-term letting include Berlin, Toronto, Vancouver, New York City and San Francisco. Since I wrote the article, Toronto has voted to regulate matters. I could have also added New Orleans to this list of regulating municipalities and there will be others.

Scotland as a whole has not followed suit with direct regulation, nor has any particular neighbourhood in Scotland. (The debate as to whether it should is referenced in the article.) To an extent, Scotland – or at least Scottish local authorities – might respond by more careful policing of existing rules, particularly fiscal rules that might catch lets that are currently not or under- declared. My understanding is there are regional variations and/or patchy approaches when it comes to such enforcement. There may also be non-declaration of income that should be liable to income tax. Important as such matters are, they are not the focus of my article so I will skim over them.

Let us now assume that Scotland does not make a direct public response, or that as regards existing rules there is: a) insufficient will or capacity to enforce them; and/or b) they are not suitable for the purpose of regulating short-term lets. What can the neighbours of a landowner who is short-term letting in a problematic way do?

Private responses

To what extent can neighbours use title conditions against another neighbour’s short-term letting arrangements? Title conditions – that being the catch-all term for real burdens, servitudes and conditions in certain leases – are land law devices that have been recognised by Scots law for some time. The most relevant of these to the present discussion are real burdens, as governed by the Title Conditions (Scotland) Act 2003. They can bind property owners and can regulate the conduct of the owner or occupier of affected land.

The following discussion presupposes that there is a relevant real burden in play: if there is not, there is no scope for regulation by this method.

Assuming there is a potentially relevant real burden, the answer to the question of whether a neighbour can use it to regulate another’s short-term letting scheme will first depend on what it says. A burden might insist on use of a property as a sole or main residence, or suggest that it not be used for a trade, business or profession. Such burdens are common in residential areas. Leasehold conditions in similar words have proven to be a means of combatting short-term rentals in England and Wales.

My article considers the framework of the Scottish regime and its potential applicability, in light of relevant case law on the validity of such burdens. It then considers the key issue of whether a neighbour could demonstrate “material detriment” when a neighbour acts in a way that breaches the terms of a burden, and as such have title and interest to enforce that burden in terms of section 8 of the Title Conditions (Scotland) Act 2003. I submit that the concerns of a neighbour of a property given over to short-term letting cannot be disregarded as fanciful or insignificant (that being the test that is appropriate, following the case Franklin v Lawson). I also submit that case law where a neighbour of a new B&B was unable to object to its operation as such an operation (Barker v Lewis) can be distinguished, owing to the difference between accommodation where there is a live-in host and short-term letting of an entire property to unsupervised guests. As such, private enforcement could take place…

…subject, that is, to finding the time and money to bring a court action. That will not be easy for many potential litigants. In the absence of a case directly on the point, I hope my article might play a small but useful role.

Conclusion

In due course, legislation may be passed to specifically regulate short-term letting in particular pinch points. In the meantime, it needs to be considered whether existing land law devices could play a role in Scotland, which I submit they already do in certain circumstances. Appropriate real burdens can come into play. This means that those offering their homes for short-term letting need to look beyond the terms of service of an online provider like Airbnb. They also need to look at their own title deeds.

And now for something completely different…

*Here is my anecdote about how perfectly well-meaning and polite short-term guests can still cause a bit of a disturbance for neighbours.

Those of you who know me or follow me on social media may have noticed I was in the USA recently, as a guest of Professor John Lovett of Loyola University, New Orleans. After I finished there, I went travelling with a group of friends who were over in the USA at the same time as me. We made use of a short-term letting platform to book three separate berths on our travels. This is the first time I have made (indirect) use of such a service. Let’s call it fieldwork.

The first of our berths was directly above a music venue and had clearly been designed with tourists like my group in mind. (We had been warned not to expect peace and quiet when there were bands playing, which suited us fine as we were there for the music.) There were no residential neighbours to disturb. The second of these berths was actually a let from a friend of a friend, so again this was not quite a “normal” Airbnb. That said, our host was careful to warn us not to block the neighbour’s drive with our car, which made me wonder whether there was any history from other guests that had stayed or if this was just sage advice.

The third berth presented more of a challenge for us. We booked this at fairly short notice, so our own planning had been light. On arrival, we were confused and were not sure which parking space or indeed which house was ours for the night. We had to enter from the back of the property, where house numbers were not quite as clear. We parked up in a space that seemed about right in terms of the directions we had been given and one of our party went to the door.

Of completely the wrong house.

On walking in (the door was not locked) and rapidly realising it was not our accommodation for the night (as it did not correspond to the rough description we had been given), my friend equally rapidly about turned before any residents noticed. We then found the correct house and the secure code entry system we had expected to see. Some of us suggested we move the car now that it seemed we were in the wrong space. We weren’t going to be long though, so we tried the entry code we had been given.

It was incorrect. We punched this in carefully three times and managed to lock the secure entry system completely.

At this point a neighbour turned up and firmly told us we had parked in his space.

We moved the car. In lieu of a better plan, we went to a local restaurant to have a very nice dinner but mainly to use their power sockets to charge phones and gain WiFi to send a frantic message to the host. We got sent a new code by the host to get in. We went back to the accommodation.

This code didn’t work either.

We called the host with a newly charged phone. We finally got a working code and got in.

Phew.

How many times neighbours of this property have had to put up with such a rigmarole I have no idea. The local restaurant benefited from our custom though.

There: that’s my short-term letting confession. I felt I needed to get that off my chest.