FREE CHAPTER from ‘A Practical Guide to the Short-Term Lets Licensing Scheme in Scotland’ by Kevin Clancy

CHAPTER ONE – HISTORICAL CONTEXT

Introduction

1. 1. Short-term lets provoke political debate, local disagreement, and occasional controversy. From relatively humble beginnings – one well-known booking platform can trace its origins back to advertising air mattresses to rent – it is now a global billion-dollar industry.

   2. The popularity of short-term lets in Scotland has soared in recent years, most notably in three local authorities: the City of Edinburgh Council, the City of Glasgow Council and Highland Council. But, it is a divisive topic. The number of hosts and guests may have continued to increase, but so too has political opposition. The administration at Edinburgh Council has made its position quite clear in recent years – it has taken the view that for far too long, too many homes have been lost in the city to the holiday market¹.

Key legislation

1. 3. At a national level, the Scottish Government has viewed the issue as being worthy of legislation. There are two key pieces of legislation that will be referred to in this book – the Civic Government (Scotland) Act 1982 (which will be referred to as the 1982 Act for ease) and the Civil Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2022 (which will be referred to as the 2022 Order for ease). Those reading this book who have experience in civic licensing matters (such as taxi licensing, public entertainment licensing, etc) will be well familiar with the 1982 Act. That Act sets out the framework by which licensing applications should be applied for and determined. Although the 2022 Order is a new legislative instrument, the new short-term licensing scheme will be implemented with reference to both the 1982 Act and the 2022 Order.

   4. From a position of relatively no regulation to the introduction of the 2022 Order, it has not been a smooth journey for the Scottish Government. That formal regulation of short-term lets is needed at all is because the Government considered that the short-term letting of properties had become more accessible than ever before. Perhaps even too accessible. Of course, one cannot ignore the benefits to Scotland’s economy brought about by short-term lets. However, the Government wished to balance the economic advantages against concerns that existed about the growth in the numbers of short-term lets. It is a complicated conundrum, in which (i) increasing tourism and economic growth, (ii) reversing depopulation and staff shortages in rural hospitality, and (iii) limited housing stock for a local community that is becoming more irritated by “stag and hen do tourism”, are all competing interests.

Expert Panel on the Collaborative Economy and Short-Term Lets Delivery Group

1. 5. To begin our legislative journey, we must go back to April 2017 when the Scottish Government set up the Expert Panel on the Collaborative Economy. The Panel was set the task of identifying how Scotland could maximise the benefits of the collaborative economy, whilst overcoming challenges that might stand in the way (economic and social challenges, but underpinned by regulation that was fit for purpose).

   6. Around a year later, the Short-Term Lets Delivery Group (with representation across areas such as housing, licensing, planning, tax, etc) was established with a solutions-focused approach to the question of short-term lets. In addition to gathering relevant evidence, the Group also sought to identify what existing powers local authorities already had to combat this issue. Put another way, it was in nobody’s interest to double regulate the same issue.

Consultations, consultations, consultations…

1. 7. In April 2019, the Scottish Government launched a public consultation² and commissioned independent research³ into the impact of short-term lets on people and communities. The consultation paper considered the available evidence as regards short-term lets, not only in Scotland but also further afield. This was in the context of the consultation paper referencing its understanding that there may be upwards of 21,000 short-term listings in Scotland. (Pausing there: on the – perhaps unlikely – hypothesis that all hosts and operators of existing short-term let premises apply for a short-term let licence, can it be said that the relevant stakeholders are sufficiently resourced to deal with what might be described as a tsunami of licence applications – will licensing authorities have staff numbers to cope? Will Police Scotland have the resources to report on every application? What about the fire service and other enforcement officers? Even allowing for the likelihood that a significant proportion of hosts and operators may leave the short-term let sector and return to the private landlord sector, this will still be a considerable workload for licensing authorities to deal with.)

   8. It was at this point that the possibility of licensing short-term lets was first raised as part of the wider discussion as to what sort of regulatory approach would be appropriate and proportionate. An alternative that was considered (and strongly supported by industry bodies), but ultimately not taken forward, was a registration system (such as had already been implemented on the continent – as in the Netherlands).

   9. The consultation (the first of three) was reported on in October 2019⁴, the consultation having received over 1,000 responses. This was accompanied by research to assess the positive and negative impacts of short-term lets⁵.

   10. In parallel with the consultation, what is now the Planning (Scotland) Act 2019 completed its passage through the Scottish Parliament and included provision for the establishment of short-term let control areas⁶. The planning implications of the new short-term lets regime are discussed in more detail in chapter 4.

   11. The start of 2020 then saw the Scottish Government bring forward several proposals in consequence of the consultation response and the independent research. There was a commitment to consider how short-term lets would be financially taxed, and to empower local authorities to introduce short-term let control areas. However, the headline announcement was the proposal to establish a licensing scheme (and not a registration scheme) for short-term lets. This would not be an entirely new or radical piece of legislation; rather, the licensing scheme would use powers that already existed under the 1982 Act. Addressing what was perceived to be a significant gap with the status quo, the licensing scheme would include mandatory safety requirements which would apply to all short-term lets across Scotland.

   12. The COVID-19 pandemic then struck in March 2020, which only served to delay matters by several months. Indeed, it was only towards the end of 2020 (September) that the Scottish Government launched its second consultation – this time introducing a working definition of short-term lets. Detailed documents were also published setting out what such a licensing scheme might look like. As before, a report to the consultation was published in December 2020⁷ after having received over 1,000 responses. The intention had been to bring a licensing scheme into effect by April 2021, and the rationale in imposing mandatory safety standards was that it would mean a level playing field for all short-term lets.

   13. There were then a couple of twists and turns at this juncture. The then Minister for Local Government, Housing and Planning (Kevin Stewart MSP) laid regulations at the Scottish Parliament which would have given short-term letting licensing the force of law (together with the Control Area Regulations and the Business and Regulatory Impact Assessment). That was in December 2020. In what could only be described as a complete U-turn, the proposed Licensing Order was withdrawn in February 2021. That was (at least in part) as a consequence of widespread criticism and concern from various stakeholders. The withdrawal of the proposed Licensing Order would also give the Scottish Government time to provide draft guidance on the licensing scheme. Given the proximity of the Scottish elections in May, the issue was effectively parked for several months (albeit the Scottish Government still managed to ensure that regulations legislating for short-term let control areas were approved by the Scottish Parliament, and came into force on 1 April 2021 – more on that in chapter 4).

   14. By June 2021, a third consultation was launched⁸. This was much more narrowly focused on what was then a revised draft Licensing Order and getting the implementation of a licensing scheme correct. This led, on 7 October 2021, to the Cabinet Secretary for Social Justice, Housing and Local Government (Shona Robison MSP) announcing what were said to be a number of pragmatic changes⁹. For example, regulations designed to prevent “overprovision” were to be removed from the scheme; there was to be a reduction in the public liability insurance requirements; there would be focused use of inspections and stronger guidance on fees; publicity and notification requirements would be simplified. By the end of November 2021, a new Licensing Order was laid before Parliament.

Legislating for the 2022 Order

1. 15. The result of this was the approval of the 2022 Order by the Scottish Parliament on 19 January 2022, and which came into force on 1 March 2022. Local authorities had until 1 October 2022 to establish a licensing scheme (which has been done). As will be discussed in Chapter 3, there are then various deadlines for applying for and obtaining a short-term let licence. All hosts and operators must have a licence by 1 July 2024.

   16. In order to help hosts, booking platforms, local authorities and others better understand how the 2022 Order should be interpreted and implemented, the Scottish Government has published guidance documents in two parts (and which will be referred to throughout this book). Part 1 is directed towards Guidance for Hosts and Operators¹⁰. Part 2 is directed towards Licensing Authorities, Letting Agencies and Booking Platforms¹¹. Both guidance documents should be considered essential reading for anyone involved in dealing with short-term let licence applications (which will be referred to as Part 1 or Part 2 of the Guidance for ease).

Purpose of the licensing scheme

1. 17. The stated purpose in the Scottish Government guidance of this new licensing scheme is “to ensure basic safety standards are in place across all short-term lets operating in Scotland”¹². More specifically, the aims of the licensing scheme are stated to be¹³ :

• To ensure all short-term lets are safe

• To facilitate licensing authorities in knowing and understanding what is happening in their area

• To assist with handling complaints and address issues faced by neighbours effectively.

1. 18. Ensuring all short-term lets are safe is a laudable aim of a new licensing scheme. However, as we will discuss in Chapter 4, the actual implementation of licensing policy by local authorities risks confusing licensing issues (regulation and safety) with policy concerns that are more truly within the domain of the planning authorities. To the extent any part of a licensing policy introduced by a licensing authority does go beyond its licensing function, it introduces the possibility that the policy is vulnerable to judicial review or appeal in what is known as the Brightcrew sense¹⁴, or any individual decision on a licensing application is vulnerable to appeal. Licensing authorities will be well advised to remember that distinction.

   19. For those looking for even more “light” reading on the subject, useful background information can be found in the report of the consultation on the draft Licensing Order¹⁵ and the Business and Regulatory Impact Assessment¹⁶, both published on 23 November 2021.

   20. With that overview of the background to, and context for, the 2022 Order, the first important question to address is what is (and what is not) a short-term let?

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