The growing trend for people to enjoy vacations in the homes of others has provoked much debate from neighbours, communities and local authorities across Scotland, as well as the rest of the UK.
In response to this, the Scottish Government assured local authorities that they would be given appropriate regulatory powers to balance the needs and concerns of their communities, with wider economic and tourism interests. A Short Term Lets Delivery Group, made up of officials from various areas across the Scottish Government, was set up to look at the positive and negative impacts of short term lets and what further powers local authorities may need, to address major concerns.
Using the findings and recommendations of the Delivery Group - and other evidence gathered on short term lets - the Scottish Government has launched a consultation – Short Term Lets: Consultation on a regulatory framework for Scotland – setting out how short-term lets should be regulated.
Let’s look at what the consultation is proposing:
What is a short term let?
There is no statutory definition. To avoid catching occasional stays with friends and family, it is proposed that a short term let will occur if:
- The accommodation is made available for a cumulative period of 28 days or more in any rolling period of 365 days; and
- At least one of the lets in that 365 day period is not a private residential tenancy.
Will there be exclusions?
No new regulation is proposed for the hotel and B&B industry so stays at hotels and B&Bs will not be included. Short term stays in other places such as women’s refuges and hospitals and stays in student halls of residence (whether by students or others) will also be excluded from any new regulations.
The consultation is focusing on arrangements where the host, be that a person or company, is providing accommodation to one or more guests on a short term basis but not for the purpose of occupying as their main residence; a short term let cannot be a private residential tenancy (PRT) because the guest/occupier is not using the property as their only or principal home. And so guests occupying properties under short term lets do not have the legal protections available under a PRT.
Are there different types of short term lets?
The consultation draws distinctions between different types of arrangement:
- “sharing” – where the guest shares the accommodation with the host
- “swapping” – where the whole of the property usually lived in by the host is let by the guest, often with the host spending their holiday in the guest’s home;
- “secondary letting” - where the whole of the property occupied by the guest is not the home of the host and the host is absent
Throughout, the consultation asks if these arrangements should be treated differently under any regulatory framework.
Are short term lets currently regulated?
Short term lets are not wholly unregulated at present. In some areas, if the use of the property for short term lets is considered by the local planning authority to be a material change of use, planning permission will be needed. The Planning Bill, which has just passed, is taking this one step further. It will allow local authorities to designate the whole or part of their area as a short term lets controls area. Any short term let occurring in such an area will constitute a material change of use and will need planning permission.
The consultation asks for comments on safety issues related to short term lets. Private rented sector landlords must ensure that the property they are letting complies with the Repairing Standard at the beginning and throughout a tenancy. This includes health and safety requirements which do not currently apply to short term lets. It has been suggested that there should be parity in health and safety regulation for all short term let accommodation that is not the owner’s residence.
Private rented housing occupied by three or more unrelated tenants also requires a House in Multiple Occupation (HMO) licence. The Scottish Government is currently consulting on whether the properties covered by the HMO licensing regime should be extended to holiday lets which house contract and transient workers.
What about tax and short term lets?
A section of the consultation is dedicated to how short term lets could be treated for tax purposes under the current regime. Separately, the Scottish Government intends to consult on whether local authorities should be allowed to levy a tourist tax. Any such tourist tax would apply to all forms of commercially let accommodation including hotels and possibly short term lets.
What would a regulatory framework involve?
If short term lets are to be regulated, the question of how must be answered. This is where the Scottish Government favours introducing a framework of options for local authorities to choose from:
- A basic registration scheme for which a fee would be paid to register and, for example, health and safety checks could be carried out;
- A licensing scheme including and expanding on the basic registration scheme, perhaps with a fit and proper person test for which a fee would be charged;
- Market-based mechanisms to control short term lets, for example, a charge to limit the number of short term lets in a given area;
- Limiting the number of days on which a host can grant short term lets
The consultation explores how each of these may work as part of a national regulatory framework from which local authorities could tailor a solution for their own area.
The consultation also asks how commercial hosts should be treated. Should a distinction be made between small scale hosts and hosts with large property portfolios; how should commercial host be defined – should it be down to how they are treated for VAT purposes, the number of addresses they have, or the concentration of accommodation offered by the host?
How would the regulations be enforced?
The consultation asks for views on introducing a complaints system to make it clearer how to complain and how complaints should be handled.
Inevitably, if regulation is introduced, there will have to be sanctions for non-compliance. It is proposed that any penalties such as fines or revocation of licence will be imposed on the hosts or their intermediaries and not on guests, as they will be transient and more difficult to enforce against.
The impact of implementing new regulations
With a whole chapter dedicated to the definition of short term let and the various views expressed, it will be essential for any new regulations to be clear about what will, and what won’t, constitute a short term let.
The potential for local authorities to designate areas as short term let control areas, within which planning permission will be needed, could be a big game changer for some involved in short term letting; it will be interesting to see how the planning authorities cope with the additional applications, if controls are put in place. What will happen in Edinburgh, for example, when the Fringe Festival is looming and the council is inundated with applications?
If the Scottish Government proceeds with a regulatory framework, it will have a difficult balancing trick to master. While the number of complaints about the adverse effect on housing availability, and prices in hotspots like Edinburgh and the anti-social behaviour of some guests is rising, research has shown that the short term rental sector supports 15,000 jobs in Scotland and generates £723 million of economic activity. It will also have to be careful not to introduce regulations which overlap with current and potential extension of requirements under the HMO licensing regime for holiday accommodation that houses contract and transient workers.