Regulating short-term lets in Scotland

Short-term letting of property is something that has been written about widely in recent years in a variety of jurisdictions. Scotland is no exception, with the two geographic pinch points of Edinburgh and the Isle of Skye featuring regularly in press coverage (see this report from The Times (£) for the former and this feature from Channel 4 News for the latter). Of course, the provision of short-term (holiday) lets is not a new phenomenon. UK landlord and tenant legislation down the years has specifically carved out holiday lets from the scope of private sector regulation: as just one example, see paragraph 8 of this schedule of exceptions to the Housing (Scotland) Act 1988. The spike of short-term letting though – as demonstrated in this Scottish Government commissioned research published in October 2019 – is such that it has brought the activity into sharp focus.

It goes without saying that there would not be such a spike if there was not a demand, and those who are supplying for that demand are doing so for a reason. Better economists than me might identify the benefits to the local economy the users of short-term lets bring. Standing that, it would also be fair to note that the increase in short-term letting has not been uniformly welcomed. A number of people have explored ways by which this trend might be curbed. Amongst this number was yours truly. I offered an analysis based on title conditions (that is to say, controls that often exist in the title deeds of a property). Andy Todd offered a slightly different approach: as detailed in this blog post, he highlighted the potential of a device from the Title Conditions (Scotland) Act 2003 in relation to new-builds, namely the development management scheme, and also pointed out those letting out properties that made use of shared features might face some kind of enforcement action from the co-owners of those common parts in certain circumstances. Taxation and planning matters might also be relevant. And in a recent twist, there was even a European case about whether Airbnb (a prominent facilitator of short-term lets) was an estate agent and as such subject to relevant regulation: CJEU ruled that is was not, as reported by the BBC here (see also the CJEU Press Release), meaning Airbnb did not fall into a comparable regulatory quagmire to Uber (the, eh, sorta taxi service).

That gives a bit of a flavour, but it is clear that none of those have provided a complete answer to address the upward trend. (I mean, it would have been lovely to have had my article cited approvingly in a test case about the enforceability of a real burden that (for example) stated a dwelling had to be used as a private home rather than a business, but that would have required an appropriate set of facts coupled with a determined and suitably flush litigant.) If the spike of short-term lets is an issue, maybe another proactive approach rather than reactive approach would be more appropriate. Which is where a recent announcement of the Scottish Government comes to the fore.

On 8 January 2020, it was announced that the Scottish Government would “provide local authorities with the ability to implement a licensing scheme for short-term lets from spring 2021“. Such measures would (and I quote):

include a new mandatory safety requirement that will cover every type of short-term let to ensure a safe, quality experience for visitors;

give councils the discretion to apply further conditions to address the concerns of local residents.

Further, there would be provision to “designate control areas to ensure that planning permission will always be required for the change of use of whole properties for short-term lets“. There is also a separate commitment to consider taxation, alongside the soon to be introduced Transient Visitor Levy Bill.

I will resist the urge to offer much comment on these commitments, save to note that the safety requirement seems more than sensible in an environment where the private rented sector is subject to similar controls and there have been disconcerting reports of, and indeed successful enforcement action relating to, people being offered “holiday let” documentation in a situation that was in actuality a private let.

Returning to the planned regime and its introduction, how will it work? It is still early days, but an existing piece of legislation has been earmarked as the prospective home of the licensing regime, namely the Civic Government (Scotland) Act 1982. (Control areas will be covered by a different regime, which was introduced by section 17 of the Planning (Scotland) Act 2019. The Scottish Government has also clarified that lodging or home sharing arrangements, that is to say a landlord providing a room in her own home or someone allowing others to stay in her home whilst on holiday, will not be affected by control areas.)

The Civic Government (Scotland) Act 1982 is an important statute when it comes to municipal licensing in Scotland. Anyone who wishes to operate a taxi service, a knife dealership, a scrap metal emporium, a window cleaning service, and/or a sexual entertainment venue (but probably not all at the same time) had better pay attention to its terms. Short-term letting rules will be inserted into this statute, which has already been much-amended to reflect the fluctuations of society.

Will this licensing regime work? Licensing as a whole is, I confess, not squarely within my field of expertise (albeit I have looked at the matter from a property law perspective, particularly in relation to rural matters). At this point I will draw on the views of Stephen McGowan, a licensing expert and (I declare an interest) former colleague (in our previous lives at Tods Murray LLP). Writing on the website of his law firm, Stephen has noted – quite rightly – that the introduction of such a scheme will be something of a heavy lift. Admittedly there will be some practices from the world of private landlord registration that might be easy enough to transpose, but there will still need to be some careful consideration of any differences or nuances that the short-term letting regime will have. Stephen also notes the lack of a “grandfathering” scheme, such that no-one who wishes to offer short-term accommodation in the future will be able to rely on historic (pre-licensing) activity. (The policy argument against allowing “grandfather rights” seems relatively clear to me, in terms of uniformity across the sector, ensuring safety, and also avoiding any kind of rush to let properties before the regime is enabled, but the point about the administrative burden stands nevertheless.)

On the assumption that these teething problems can be safely survived, what next? Stephen keeps his powder dry on that point, which is fair enough as we will have to wait and see. It might be that Scotland can learn from other jurisdictions in tailoring its own regime, as Scotland is not the first to grapple with such issues. One thing is for sure though: given how widespread short-term letting is and how strong feelings are in this area, there will be plenty of people watching for developments in this area very carefully indeed.

Further reading

I will offer two further resources about the recent announcement, from different standpoints for balance.

  • This post by Gordon Maloney from Living Rent, hosted by Bella Caledonia, offers some analysis from the perspective of “Scotland’s tenants’ union” which “wants homes for people, not for profit“.
  • I have not seen any official announcement from Airbnb, but a few words are offered at the end of this BBC article.

About basedrones

Bachelor of Laws. Scots lawyer working at the University of Aberdeen. English law qualified. Took far too long to write this bio. Blogs on legal issues, with occasional veering into other purportedly intellectual stuff from time to time. Tweets about legal issues, education, law clinics, fitba, music, rogue cell division and not at all about politics at @MalcolmCombe.
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