The Festival frenzy which descends on the capital annually is creeping ever closer, the City Centre already feeling distinctly busier, but could the Scottish Government put a spanner in the works of your plan to ‘cash in’ this Festival season?
Accommodation in the City Centre is like gold dust at the best of times, and this demand is only heightened during the summer months. Unsurprisingly, this has resulted in many spotting an opportunity to boost their income, with an influx of Airbnb and other holiday lets cropping up left right and centre in city centres. Airbnb presents an opportunity for city landlords to capitalise on the influx of tourists visiting the Capital, often at a time where student lets lay empty, exam season over and students giving up properties to return home for the Summer.
The accessibility of the platform means that Airbnb appeals to those from all walks of life, and all generations – from students with an empty flat over the summer, young professionals looking to boost their income, or those looking to supplement their pension pot. With the introduction of the Scottish Private Residential Tenancy (SPRT) regime in Scotland in 2017, residential tenancies attract increased security of tenure and arguably pose a risk to a landlord who wishes to only rent a vacant property out for 3 months until the new semester commences in September. As holiday lets are exempt from this relatively new regime, Airbnb inevitably presents an attractive opportunity to make extra money during the summer months without the associated obligations and risk of security of tenure.
It is unquestionable that for some the appeal of short-term letting vehicles (such as Airbnb) is the lack of regulation of the industry and the perceived absence of hoops to jump through. There is currently no need for a ‘host’ to register with the Local Authority, with no equivalent registration scheme in place to that for residential landlords. ‘Hosts’ are not required to obtain a licence to rent out a property as a short-term let or meet any minimum standards. However, this may soon change with the current two-pronged approach taken by the Scottish Government and Scottish Parliament namely by means of the Planning (Scotland) Bill (which was passed by the Scottish Parliament on 20 June but is yet to receive Royal Assent) and the Scottish Government consultation on a regulatory framework for Scotland on Short-Term Lets. Whilst in the early stages, it is unsurprising that the introduction of regulation of short-term letting is high up on the political agenda. The desire for regulation of these new industries is something which we are all too accustomed with - the various litigation that Uber have found themselves embroiled in is just one example of this trend.
Why is regulation of short-term letting now regarded necessary?
Whilst the tourism industry in Scotland has seen exponential growth in recent years, it is the advent of peer-to-peer short-term letting vehicles, such as Airbnb, which has caused much controversy and for some ignited a need to regulate the industry. Whilst it is undoubtedly the case that tourism greatly benefits and supports the Scottish economy and local businesses, something which will become even more crucial in the post-Brexit era, the negative impact of short-term letting is felt by those neighbourhoods with a high concentration of holiday lets. In those areas with a disproportionately high concentration of short-term lets, some argue that the prevalence of Airbnb type holiday lets has the potential to push up private rental prices, and negatively impact the availability of affordable rental accommodation for those who call the city centre their home. This is not to mention the perceived negative impact on those neighbourhoods and permanent residents who are faced with frequent nuisance of transitory holidaymakers coming and going at antisocial hours, the resultant lack of community cohesion and the perceived negative impact on the amenity of neighbourhoods.
The law surrounding Airbnb (and other holiday lets) presently suffers from a distinct lack of clarity. At the moment planning permission is only required in some instances, and there are no clear-cut rules on when it is (or is not) required for a short-term let. Much depends on the type of property and the previous use of the property. Planning permission is required in situations whereby letting the property as a short-term let constitutes a ‘material change of use’ of the property in question. There are a number of factors to consider in establishing whether there has been a ‘material change in use’– the frequency of arrivals and departures, turnover of guests, numbers of guests, and frequency of noise to name but a few. The current position is far from clear-cut.
The Planning (Scotland) Bill
Section 11B of The Planning (Scotland) Bill (as amended by the Green Party and Andy Wightman MSP at Stage 2) sought to control short-term holiday lets by declaring that a short-term let would, in most cases, constitute a material change in use and would require a specific grant of planning permission. This would have required all ‘hosts’ of short-term letting platforms to secure Change of Use planning permission from their local authority if the property listed was not their sole or main residence. Accordingly, this requirement for planning permission would not apply to those people who rent out a room or part of the property they live in themselves.
It was thought that this Stage 2 amendment would provide the much-needed clarity. However, the Bill as passed by the Scottish Parliament (The Bill in full as passed is available here) is a watered-down version of the previous amendment. Many have argued that, as passed, the relevant section is worse than the status quo. A last-minute Stage 3 Conservative amendment removed this requirement for all short-term lets to apply for Change of Use planning permission, and instead introduced the concept of designated “control zones” where local authority planning permission would be required. The designation of an area as a “control zone” will be left in the hands of local authorities. Whilst this may be seen to enable a more flexible approach to the regulation of short-term letting, it leaves those outwith a designated “control zone” with unclear rules.
It was hoped that the passing of the Planning (Scotland) Bill would provide a much-needed opportunity to resolve the ambiguity surrounding short-term letting and the requirement (or otherwise) for planning permission to operate your property as an Airbnb or holiday let. However, the watered-down amendment of s11B and the introduction of the concept of a “control zone”, heralded a “wonderful compromise” by the short-term letting industry, arguably has further muddied the waters.
Local authorities take action
Currently there is a distinct lack of a joined-up approach between local authorities in their approach to regulating short term holiday lets. This is unquestionably attributable to the lack of an overarching national regulatory framework, which authorities could then tailor to their specific needs. It has been argued by many that there is a need for an overarching regulatory framework in one form or another. It is equally arguable that there is no ‘one size fits all’ solution. Clearly some local authorities are feeling the brunt of Airbnb more than others. In 2018 the number of Airbnb listings in Edinburgh sky rocketed. The annual UK Housing Review, published on 4 April 2019, revealed that in the City of Edinburgh alone there are over 10,000 Airbnb’s – this equates to 1 for every 48 people. The Scottish Government consultation puts the figure at 9,000 whilst Edinburgh City Council have stated there could be as many as 12,000. With the recent launch of the V&A it is likely that Dundee will experience a similar surge in visitors and influx in holiday lets. As more Brits opt for a ‘staycation’ it is likely this upward trend will be felt in all parts of the country, from the remote and scenic Highlands and Islands to the densely populated city centres.
This current disjointed approach has seen some local authorities taking enforcement action against short term lets, whilst others have been seen to take a more passive approach. Most properties which operate as short-term lets are doing so without relevant planning permission. Glasgow City Council, as early as March 2017, introduced regulations to tackle the boom in Airbnb’s. These regulations require permission from the local authority before letting your property as an Airbnb. The relevant permission will not be granted where a flat is accessed through a communal entrance. This complaints-based enforcement system could see owners facing a fine of £2,000 for failure to comply with an enforcement notice.
It remains to be seen whether this regulatory action has stunted the growth of the Airbnb industry in Glasgow City Centre. While Glasgow became Scotland’s first city to introduce stricter regulations in this area, Edinburgh City Council have recently followed suit, launching a ‘whistleblowing’ type scheme whereby local residents are encouraged to police and report short-term lets or “party flats” operating in their local area.
This approach is unsurprising given the sheer number of short-term lets concentrated in Edinburgh City Centre. There are currently several local authority enforcement notices on owners of properties operating holiday lets working their way through the planning system – we are certainly seeing an increase in clients looking for advice in this area. It is likely that with the new whistleblowing scheme there will be an upward trend in Enforcement notices served on property owners in the city centre. Properties which are let exclusively for the purpose of short-term holiday letting will likely be the most vulnerable to enforcement action. The success of such a bespoke scheme in tackling the plight of short-term lets remains to be seen – the system remains in its infancy and is yet to be tested during the height of the Festival season.
It is against this backdrop that the Scottish Government have committed to ensure that local authorities have appropriate regulatory powers to balance the needs and the concerns of the local community with the wider economic impact on the tourism industry. The current Scottish Government consultation on a regulatory framework for short-term letting invites responses on a number of issues relating to short-term letting and the perceived impact on the local community. The consultation closes on 19 July 2019. We will certainly be following the consultation with bated breath.
If you are considering renting out an existing property, or are considering purchasing a property for the purpose of short-term letting, there are many issues which need to be borne in mind – the potential need for planning permission, the consent of your lender or insurer, or the existence of burdens in the title deeds to your property enabling neighbours to take enforcement action against you, to name but a few. Given some local councils are now taking a more robust, hard-line approach against short-term lets it is vital you are informed. What appears to be an inexpensive way to boost your monthly income may turn out to be a very costly exercise without the appropriate advice.
We are experienced in all aspects of private letting and can guide you through the process. Get in touch with our Property Disputes team if you are currently renting out your property as a holiday let or are contemplating doing so.
