The issue of short-term lets has been very controversial over the last decade in Scotland, with companies like Airbnb and others providing a readily accessible platform for residential accommodation to be let on a short-term basis.

The speed at which operators like Airbnb have grown in the marketplace and the consequent outcry from local communities about the impact of tourists and other short stay visitors in their neighbourhoods had led to calls for regulations to catch up with the current market.

In response, the Scottish Government introduced draft legislation aimed at setting up a scheme which would require operators of short-term lets to apply for licences. Last week, the Scottish Parliament finally approved the required legislation to introduce a licensing scheme for short-term lets in Scotland.

The draft legislation has proved equally controversial with trade groups representing the self-catering industry in particular calling for a registration scheme as a more workable solution. However, after a series of consultations and the withdrawal of the initial draft order due to concerns about its impact, the Civic Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2022 ("Licensing Order") was approved by the Scottish Parliament and will come into force on 1 March 2022.

The Licensing Order introduces a licensing scheme designed to ensure short-term lets are safe and address issues faced by neighbours; to facilitate authorities in knowing and understanding what is happening in their area; and to assist with handling complaints effectively.

Finding the right balance between the needs of local communities and wider economic and tourism interests has clearly been a difficult challenge. Some representatives advocated that the licensing scheme was necessary to provide meaningful powers to tackle the problems associated with short-term lets whilst others felt that the new scheme is "overly burdensome" and a registration scheme would be more proportionate.

Under the Licensing Order, local authorities in Scotland will have to establish a licensing scheme by 1 October 2022 and existing hosts will have until 1 April 2023 to apply for a licence. All short-term properties will require a licence by 1 July 2024.

There will be a review of the scheme in 2023 which will allow the Scottish Government to undertake further research into some of the areas where the impact of the scheme is unclear, such as the impact on the tourism industry. Further consultations and possibly further adaptation of the scheme are to be welcomed in order to retain the correct balance between the various competing interests.

The Licensing Order will work in tandem with the Town and Country Planning (Short-term Let Control Areas) (Scotland) Regulations 2021 which have been in force since April 2021, providing a mechanism for Councils to establish short-term let "control areas" which aim to help manage high numbers of short-term lets.

Under these regulations, Councils can establish areas where any property operating as a short term let for more than 28 days a year have to apply for planning consent as it is considered a change of use. The Scottish Government have published a planning circular providing guidance for local authorities on how to establish a short-term let control area. There are currently no short-term let control areas in Scotland, but the City of Edinburgh Council have completed a consultation on whether to implement a city-wide control area. Planning permission for a short term let in a control area is a pre-requisite for obtaining a licence under the Licensing Order.

The Licensing Order will have significant implications for the short term let sector and updated guidance for both local authorities and those affected by the Licensing Order is expected to be published soon.