Scottish government consultation on regulation of short term lets
The Scottish Government has issued a consultation paper setting out detailed proposals for the regulation of short terms lets. The consultation builds on an earlier 2019 consultation on potential options for regulating this sector and proposes to use the powers under the Civic Government (Scotland) Act 1982 to license short terms lets in Scotland. Whilst the 2019 consultation exercise was underway, the Scottish Parliament also included a new power in the Planning (Scotland) Act 2019 to designate “control areas” where planning permission would be required for a change of use to a short term let. The current consultation paper sets out how it is proposed to regulate short terms lets through both the licensing and planning systems.
The consultation period runs from 14 September to 16 October. Whilst the proposals are for the introduction of sets of regulations, no draft regulations have been provided. This process can be contrasted with the consultation on proposed changes to pre-application consultation on planning applications which also results from the 2019 Act. The latter consultation lasts from 13 August to 6 November and includes draft regulations. The changes to short term lets might be considered more significant in nature than the changes to pre application consultation. It is perhaps surprising that the current consultation period is so short and that the draft regulations – on which the new system will depend – are not available for scrutiny.
Definition of Short Term Lets
The 2020 consultation paper appears to propose a common definition of short term let for licensing and planning purposes where a property meets all the following criteria:
a) residential - the let is made to one or more guests for them to reside at the accommodation;
b) accommodation – the accommodation is all or part of a house or flat or serviced apartment (but it is not on the premises of a hotel or other class 7 premises);
c) temporary - the accommodation is not the guests’ only or principal home;
d) commercial - the let is for commercial consideration (i.e. for money or benefit in kind to the host, such as provision of a service or reciprocal use of a property); and
e) excludes immediate family – none of the guests are members of the same immediate family as the host or host’s household.
The proposed definition varies in two significant ways from the definition which was used for the purpose of the 2019 consultation. First, the 2019 consultation defined the temporary nature of short term lets by reference to a letting period of less than 28 days. The 2020 consultation does not set a maximum time limit for the occupation period. The Scottish Government explains that this avoids a potential loophole whereby a longer temporary let of a worker staying in temporary accommodation for a 3 month contract would not be regulated. That may be correct. However, it would also introduce considerable uncertainty with a test based on whether accommodation is a guest’s only or principal home. For example, a flat could be let on a long term basis to a commuter who uses the flat several times a week but otherwise resides elsewhere. The proportion of time in each residence could vary during the year. Would the lease of such a flat be a short term let?
Second, the 2019 consultation excluded various types of accommodation such as students halls of residence from the definition of short term lets. The 2020 consultation does not do this. Whilst it could be understood that short term letting of student accommodation to non-students during vacation time might be seen as a short term let, could there be circumstances in which student accommodation might not be seen as a student’s only or principal home and so also be subject to a requirement for a license?
Notwithstanding the definition of short terms lets which are used in the 2020 consultation, it should be noted that section 26B of the 2019 Act states that private residential tenancies under section 1 of the Private Housing (Tenancies) (Scotland) Act 2016 do not constitute a short term let for the purpose of designating a short term let control area. This point is not acknowledged in the consultation paper.
Licensing
The Scottish Government proposes that all short term lets will require a license with no exceptions. They see the benefit of this approach as being easy to understand. However, as explained above, the definition could potentially extending the licensing requirement into conventional private letting and student accommodation which may have unintended consequences.
The intention is that the local authorities will be given power to implement the licensing system from 1 April 2021 with all local authorities being obliged to have a live system by 1 April 2022. A transitional system is proposed to allow existing properties to continue to operate whilst requiring new properties to obtain a license before operating. Existing properties will then brought into the licensing system with all properties requiring to be licensed by 31 March 2024.
The consultation paper contains a reasonable amount of detail on the proposed licensing system. An application for a license may be made for home sharing (where the host’s home is used) or secondary letting (where the property is not the host’s home). The Scottish Government intends to set mandatory licensing conditions which will apply throughout Scotland and primarily relate to the safety of the property. These mandatory conditions must be met at the time that the application is made. Local authorities will also have discretion to impose additional conditions but the Scottish Government intends to prohibit local authorities from setting a limit on the numbers of nights for which a property can be let.
Control Areas
Planning law already recognises that use of a private dwellinghouse for short term holiday or leisure use can amount to a material change of use which requires planning permission. Each case depends on its facts and is a matter of fact and degree. Section 26B of the Town and Country Planning (Scotland) Act 1997, as inserted by the 2019 Act, however, will provide power for a planning authority to designate all or part of its area as a short-term let control area. Within a control area, the use of a dwellinghouse for the purpose of providing short term lets is deemed to involve a material change of use of the dwellinghouse. In other words, such a change of use will always require planning permission in a control area. The consultation paper confirms that all secondary letting (short term lets of whole properties) will be in the scope of control areas. This would seem to mean that home sharing (where the host is in residence) would not be subject to the new planning control although it would be subject to licensing.
It is proposed that the procedure for introducing a control area will be similar to the designation of conservation areas. Scottish Ministers further propose that the establishment of a control area would result in the removal of Class 13 permitted development rights which would otherwise allow secondary letting for up to 28 days in any calendar year without planning permission. Curiously, the consultation paper then suggests that planning authorities would not be prevented from effectively reinstating permitted development rights by universally granting permissions for secondary letting subject to a restriction on the period for which the house could be let. This might be considered an overly complex procedure. Planning authorities already have power to make Article 4 directions which enable them to restrict permitted development rights. If a universal approach is to be taken to allow short term lets up to a certain number of days without planning permission then it would seem better to establish that when the control area is designated rather than require the submission of planning applications and imposing restrictions by conditions. Planning applications would then only be required for operation in excess of the maximum letting period. That would be similar to the system which currently operates in London.
A key feature of the proposed control area system is that any planning permission would only be valid for a default period of 10 years and that planning authorities would have power to revoke planning permission after that time. There is no reference to any payment of compensation for such revocation. The consequences of this for developers of short term letting accommodation, and for the ability to obtain funding for such development, will be concerning, This is particularly so given that the intention is that the requirement to obtain planning permission in a control zone will apply to existing short term lets and not just new developments.
The Scottish Government proposes that, where a control area is designated, a transitional arrangement will apply so that no enforcement action will be taken for existing secondary letting properties and owners will be encouraged to submit planning application applications. No consideration appears to have been given to the fact that some properties may have operated as short term lets for more than 10 years and could therefore be immune from enforcement action. Again, this raises a question of fairness if the operator of new planning permission in a control zone could face revocation of his consent without compensation but the operator of existing premises (perhaps confirmed through as certificate of lawful use) could not.
Conclusions
The Scottish Government clearly has a policy intention to introduce licensing of short term lets and enabling legislation on control areas is already in place. This new area of regulation has significant implications for the short term letting market. It may be therefore regarded as a matter of some concern that only a month has been given for the current consultation exercise and that the draft regulations have not been published to enable consultees to comment on the detail of the new regime. The wide definition of short term lets in the consultation makes the intended scope of the licensing regime unclear. The planning controls to be established in control areas propose a power to revoke planning permission for short term lets without reference to compensation. It is not clear whether appropriate attention has been paid to the effect of such a draconian power on the letting market nor whether such a provision is compatible with the duties on public authorities under human rights legislation.
