On 14th September 2020, the Scottish Government released it consultation paper on the licensing of Scotland’s Short Lets.
The full consultation paper can be found by clicking here.
In this email newsletter, I shall try to outline the main content within the consultation paper and how it may affect our businesses.
We have all known that some sort of regulation has been on the cards for several years. A particular concern for many of you is the mandatory planning and subsequent decline of permission for “flatted property”; this consultation does offer some hope on that matter.
I shall try and go through the consultation paper chronologically, quoting where necessary and stating the paragraph so that you can check.
Much of the preamble is exactly that, and the definition of terms. For all intents and purposes, all of your properties will be considered “Secondary Letting” and will require a license. You will also be required to apply for planning, whether Planning is necessary will depend on a number of things that will be outlined later in this newsletter.
Control Area Regulations
When we get to Section 5, the Control Area Regulations, we can begin to understand the current situation and reluctance of Edinburgh operators to actually apply for planning. The current state of affairs states that planning MAY be required and each case should be looked at on a case-by-case basis. With Edinburgh Council’s, “decline all planning” approach, I would argue that their approach runs contrary to the current law.
However, if you look at sections, 5.3 – 5.6 we can see that Edinburgh Council will be given the power to apply the need for planning across large areas of the city. Below I quote 5.4 – 5.6.
5.4. Here we are concerned about the use of dwellinghouses for secondary letting. The term dwellinghouse is used a lot in planning law. For the purpose of the Control Area Regulations, a dwellinghouse means a house or a flat or a cottage or any independent dwelling (i.e. with its own front door, kitchen and bathroom). This includes properties adjacent to, or on the same land as, the host’s principal residence.
5.5. Currently, planning authorities (usually the local authority) consider on a caseby-case basis whether use of a dwellinghouse for secondary letting constitutes a material change of use requiring planning consent.
5.6. The Control Area Regulations will allow planning authorities to designate all or part(s) of their area as a control area. Within such a designated area, the use of a dwellinghouse for secondary letting is always deemed to involve a material change of use and requires planning permission. Outside such areas, the current case-by-case consideration would continue to apply.
Reading further, we see that “the requirement to seek planning permission in a control area would not, of itself, imply any predisposition to refuse consent. However, as planning applications are required to be determined in accordance with local development plans, it would be open to individual planning authorities to consider the inclusion of policies relating to short-term lets in their relevant local plans.” This leaves a lot of scope for Edinburgh Council to make it very difficult to successfully apply for planning, for example, in a flatted stair.
The process of creating a Control Area seems very loose still; at the ASSC we have long argued, and will continue to argue that it should be built on data and evidence, and we will continue to bang this drum. In 5.14, it states, “It is important to note that a control area does not prohibit secondary letting within it, it merely requires planning permission; this is an important consideration in determining an appropriate process.”. We can only hope that the process to designate these areas is even-handed and evidence-based. We will, in time, find out.
Licensing Order under the 1982 Act
Serious stuff you all need to read!
Section 6 is where most of the content and important stuff is written.I would urge you all to read the full section. Please see below for this list of items and mandatory standards to which operators will need to adhere.
Mandatory Conditions (Self-declaration vs Verification).
SD – Self-Declaration
V – Verification Needed.
Repairing Standard (SD)
Displaying of licence in the accommodation (SD)
Safety awareness (SD)
Gas safety (V)
Carbon monoxide safety (V)
Electrical safety (V)
Smoke detectors and heat alarms (V)
Legionella risk assessment (SD)
Maximum occupancy (V)
Display licence number (SD)
Display EPC rating (V)
Insurance cover (SD)
Relevant tax will be paid (SD)
Mortgage (or tenancy) compliance (SD)
Planning permission and conditions (SD)
As you will have been made aware by Jenny and myself, we fully expected, the mandatory safety elements to mirror those required in Long Let flats operating with tenants. We will continue to audit your properties and if there are any cracks in the safety elements, we will ensure they are plugged.
In 6.26, the paper suggests that Overcrowding can be an issue in some short term lets. As you will know, we generally follow the rule of 2 persons per bedroom maximum and only allow a sofabed if it doesn’t require too many people sharing a bathroom.
The super important points within Section 6 – pay close attention.
A lot has already been said about paragraph 6.34, here is it in all its glory:
Other mandatory conditions
6.34. Other mandatory conditions on hosts (not relating to safety directly) include:
a) Licence number – the licence number must be displayed on any advert or booking platform.
b) Energy Performance Certificate (EPC) rating – the EPC rating must be displayed on any advert or booking platform16 .
c) Insurance – the host must confirm that they have appropriate insurance cover for buildings and public liability.
d) Taxation – the host must confirm that they are aware of their obligations to pay tax on profit earned from short-term lets, as well as any local taxes for which they are liable.
e) Mortgage (or tenancy) terms – the host must confirm that letting the accommodation would not breach any mortgage lending conditions (or tenancy terms), if applicable.
f) Planning permission – the host must confirm they have applied for, or obtained planning permission (if required), that it remains current and that they are complying with any planning condition
So, a) – d) is all absolutely expected, but… e) and f) may cause some of you some issues.
E) Many of you will have bought your property on a Buy-to-Let mortgage, now is the time to start looking at the terms of those mortgages. In the last two years, the number of lenders for Holiday Lets has increased and I know that Cumberland Building Society look at each property on a case-by-case basis. Should you wish to speak directly with them, I can introduce you to Grant (Senior Business Lending Manager).
The issue that several people have brought up is, “What happens if I have a Holiday Let mortgage but then denied a license? Will I be fined by my new lender.”
At this stage, we simply do not know. In the first instance, if you have lending on your property, I would be reaching out and asking the lender about their attitude to short lets on that mortgage. I do not think there is a huge appetite – with an impending long recession – for lenders to recover mortgages etc that are breaching their terms. This is something you should be aware of though.
F) We will cover this more as there is more detail later in the document. But, yes, you will be required to apply for planning permission. Whether you will need planning permission is still open, but the application must be sought.
Other interesting bits worth mentioning
Section 6 has 144 sections.
Below I shall mention a few of particular interest
6.44 – A floorplan may be required to help establish overcrowding limits.
6.49 – Hosts may be required to build/arrange additional rubbish storage areas.
6.52 – Meeting Guests on arrival.
Local authorities may require the host to ensure that the principal guest is met in person on arrival to receive the keys to have the “house rules” (including relevant licence conditions) explained to them. This may be done by the host or hosting intermediary.
Points to cover might include:
a) maximum occupancy;
b) being considerate of neighbours (noise and nuisance);
c) waste and recycling arrangements; and
d) security and departure arrangements.
We have successfully used keyboxes and occasional meet and greets for 5 years but we do see that Meet and Greet can add a further element of guests service; however, on certain days of the year, we may have 10 guests arriving within an hour of each other across the city and beyond. If this became mandatory we would look to charge guests a mandatory Meet and Greet charge and add, for example, £15 per meet and greet and we would need to employ a small army of Deliveroo meet and greeters !
Links to any planning application:
Within the 6.70s – which I recommend you all read, includes, grounds for objection:
6.74. The grounds for objection to an application must relate to the purposes of the licensing scheme or planning rules.
For example, concerns relating to:
a) safety (licensing)
b) noise or nuisance (licensing)
c) previous complaints (licensing)
d) availability of residential housing (planning)
e) impact on character of neighbourhood (planning) or
f) the suitability of the building (planning).
These all, on paper seem fair, but I am, again, worried about e and f. These appear far too loose and we will endeavour to see how they can be used.
6.87. We are proposing to create two grace periods which follow each other.
Hosts already operating at the time that the licensing scheme comes into force have until the end of the first period to submit a licensing application. Local authorities have until the end of the second to determine all such applications. In the first period, it is lawful to operate a short-term let without a licence. In the second period, it continues to be lawful to operate a short-term let without a licence, provided that an application has been made in the first period. At the end of the second period, operating without a licence is unlawful. It will also be unlawful to continue to operate at any time where a licence application has been determined and rejected.
6.89. Local authorities can determine the length of each grace period but the total may not exceed two years. Taken together with provision at paragraph 6.4, this means that all hosts in Scotland must be licensed by 31 March 2024 at the very latest.
In 6.99, the document mentions unannounced visits – and potential entry by force! Even in “very limited” circumstances, this seems extreme.
The below outlines what will be included on the public register – this seems sensible to me.
6.139. Local authorities must maintain a register of hosts and licensed accommodation. The Scottish Government will specify the data to be included in the register, which will include the following as a minimum:
Applicant (host) name;
Hosting intermediary name (if applicable);
Property address (and property URN);
Date of application;
Licence status (refused, pending, live, revoked, lapsed etc.);
Short-term let type (home sharing and/or home letting; or secondary letting);
Postscript – initial thoughts from Barry
We all knew this was coming; we knew about the potential to make planning mandatory and not much in the consultation paper should come as a real surprise.
Areas of concern for me include:
How a Control Area is determined. Will it be evidence based (if so, what evidence) or will it be a fait accompli for Edinburgh Council?
Will all planning applications be turned down due to lack of resources? At the moment, they SHOULD be looked at on an individual basis (they are not but…)
Breach of mortgage terms being used as an excuse to not grant a license. Now could be the time to consider asking your provider or looking elsewhere. There have been breaches in mortgage terms and I believe that this was due to the lack of correct funding for holiday lets.
The document does not mention Business Rates; however, I suspect that it will be worth moving over if you have not already. This will help prove that you have been operating as short let previously and will be allowed to during the Grace periods.
Before you go – next steps.
I would encourage all recipients of this email to sign up for the following talk hosted by the ASSC on 29th September.
“Our fifth Autumn Talk on Tuesday 29th September at 12 noon (timing is different to other Talks) is entitled REGULATION OF SHORT-TERM LETS by the Short Term Lets Delivery Group, Scottish Government.
We are delighted to announce that Fergus Ewing, Cabinet Secretary for Rural Economy and Tourism & MSP for Inverness and Nairn will welcome attendees at the start of this Autumn Talk led by the Scottish Government’s Short Term Lets Delivery Group on the regulation of short-term lets.
This Talk will include a presentation by Andrew Mott, Chair of the Scottish Government’s Short-Term Let Delivery Group, Scottish Government and will will include a discussion around the regulation of short-term lets. In July 2020, the Scottish Government announced that they were resuming their plans, first unveiled back in January 2020, for the introduction of a licensing system, planning control areas, and a review of the tax treatment of short-term lets.
We are entering a period of engagement which provides an opportunity to properly assess and refine the detail of the regulations to ensure that there is an appropriate balance between the needs of local communities and Scotland’s important tourist economy. This will be an important one-time opportunity to connect directly with the Scottish Government’s Short-Term Lets Delivery Group to discuss the proposed licensing and planning measures.
Fiona Campbell, Chief Executive of ASSC, will Chair the session.”
ASSC members can access the free attendance code within the members section (you should all be members by now).
Lastly, I would only recommend that you respond to the Consultation if you have read it in its 53 page glory. The talk, on the 29th, will give you further information on how it might be implemented and the date for responses closes on 16th October. I would urge you all to respond before then.