Short-term lets: business and regulatory impact assessment

Annex C: Compliance cost estimates for mandatory conditions

Schedule 3 of the Licensing Order sets out the mandatory conditions with which a short-term let host must comply. These are set out below with a commentary on the time, effort and cost involved. Scottish Government cost estimates are based on a two-bedroom property but we also reference estimates emerging from the ASSC snap survey of self-caterers (see Annex C2).

Mandatory condition	Cost estimate	Annualised cost range	Currently a legal requirement on:	New legal requirement on:	Additional cost range
1. Agents Only those named as a holder of the licence can carry out the day to day management of the short-term let of the premises.	£0 - We do not consider that compliance with this condition will impose a cost	£0	No premises.	All premises.	£0
2. Type of licence The holder of the licence may only offer the type of short-term let for which the licence has been granted.	£0 - We do not consider that compliance with this condition will impose a cost	£0	No premises.	All premises.	£0
3. Fire safety: detection The holder of the licence must ensure the premises has satisfactory equipment installed for detecting, and for giving warning of: fire or suspected fire, and carbon monoxide present in a concentration that is hazardous to health.	For indicative purposes, we estimate £220 for a sealed long-life battery system which would last for ten years. A hard-wired alarm would cost more and should be installed by an electrician. ASSC survey suggests around £400.	£22 to £40	Home sharing and home letting, as this becomes a legal requirement for owner occupiers from February 2022 under separate legislation. Secondary letting of dwellinghouses.	Unconventional accommodation.	£0 pa for home sharing and home letting £22 to £40 pa for unconventional accommodation
4. Fire safety: furniture and fittings The holder of the licence must keep records showing that all upholstered furnishings and mattresses within the parts of the premises which are for guest use, or to which the guests are otherwise permitted to have access, comply with the Furniture and Furnishings (Fire Safety) Regulations 1988.	Negligible. We do not consider compliance with fire safety and record keeping to be generate any significant cost.	Negligible.	No premises.	All premises.	Negligible, assuming suitable records have been kept (or can be readily obtained) with regard to existing upholstered furnishings and mattresses. (Usually, the furniture is labelled as such.)
5. Gas safety Where the premises has a gas supply, the holder of the licence must arrange for an annual gas safety inspection of all gas pipes, flues and appliances in the premises and arrange for any repairs in order that the required safety standard is met.	Estimate £80 annually[83] for gas safety inspection. ASSC survey suggests £136 for gas safety inspection. We do not consider any repairs to be a new cost.	£80 to £136	No premises. Previously: best practice.	Premises with a gas supply. This cost will not apply to accommodation without a gas supply (most likely off the gas grid in more rural areas).	£0 pa for premises without gas. Up to £136 pa for premises with gas.
6. (& 7.) Electrical Safety The holder of the licence must have any electrical fittings in areas used by guests in a reasonable state of repair, and proper and safe working order as demonstrated through an electrical safety inspection written up in an Electrical Installation Condition Report (EICR).	Estimate £180 every five years for an EICR, depending on age and condition of wiring. ASSC survey suggests £257 for an EICR. (Excluding any repair and maintenance of electrical fittings identified through testing.)	£36 to £54	No premises. Previously best practice.	All premises.	From £36 pa to £54 pa.
The holder of the licence must have any electrical items in areas used by guests in a reasonable state of repair, and proper and safe working order as demonstrated through a Portable Appliance Testing Report on moveable appliances to which a guest has access.	Estimate £100 annually (but this may be included in a quote for an EICR). ASSC survey suggests £189 for Portable Appliance Testing. (Excluding any repair and maintenance of electrical items identified through testing.)	£100 to £189	No premises. Previously best practice.	All premises.	From £100 to £189 pa.
8. Water safety: private water supplies Where a premises is served by a private water supply, the licence holder must comply with the requirements on the owners of private dwellings set out in the Water Intended for Human Consumption (Private Supplies) (Scotland) Regulations 2017.	Estimate £200 one-off[84] cost for carrying out a risk assessment and in the region of £250 annually[85] for costs associated with monitoring drinking water quality. ASSC survey suggests £407.	£250 to £407	Home sharing and home letting.	Secondary letting or unconventional accommodation served by a private water supply.	£0 pa for home sharing and home letting. Up to £407 pa for secondary letting and unconventional accommodation served by a private water supply.
9. Water safety: Legionella The holder of the licence must assess the risk from exposure to Legionella within the premises, whether or not the short-term let has a private water supply.	This is an assessment which the host can do themselves by inspecting tanks and pipework within the premises. Estimate £17 one-off[86] for time reading up and carrying out the inspection. ASSC survey suggests £75.	One-off.	No premises. Previously: best practice.	All premises.	From £17 to £75 one-off cost.
10. Safety and repair standards The holder of the licence must take all reasonable steps to ensure the premises are safe for residential use. This means meeting the repairing standard where it applies.	Depends on the premises. Certain elements of the repairing standard are required by other licence conditions, for example, fire and carbon monoxide detectors.	Depends on the premises.	Houses (under the repairing standard).	Unconventional accommodation. Previously best practice.	We do not consider there to be additional costs from making sure that the premises are safe.
11. Maximum occupancy The licence holder must ensure that the number of guests residing in the premises does not exceed the number specified on the licence.	Estimate: £22 one-off[87] cost to provide a dimensioned layout of the property, where this is needed. There may be additional costs in providing the local authority with information to justify a maximum occupancy that appears high (e.g. 10 people in a two bedroom property).	One-off.	No premises. Previously: normal practice to calculate the maximum number of guests that can safely be accommodated.	All premises.	£0 where layout not required. £22 one off cost where layout required.
12. Information to be displayed The holder of the licence must make certain information available within the premises in a place where it is accessible to all guests, including licence conditions; fire, gas and electrical safety information; and details of how to summon the assistance of emergency services.	Estimate £22 one-off[88] for time, copying and a folder. These are documents and information the host should have to hand. There is a one off-cost in making copies of the documents and putting them in a folder or otherwise making them available to view at the property.	One-off.	No premises. Previously: best practice.	All premises.	£22 one-off.
13. Planning permission Where the premises is in a control area, the holder of the licence must have made a planning application or have planning permission already.	Estimate £520-1,000 one-off where planning permission is now required but was not before. Planning costs are discussed further in Annex C1.	One-off cost.	Some houses. Previously variable by area. Even within control areas, planning permission may have been required before designation (depending on the local authority's planning policies).	Secondary letting of dwellinghouses in a control area.	£0 for home sharing and home letting and unconventional accommodation Up to £1,000 for some secondary letting of dwellinghouses in a control area.
14. Listings The holder of the licence must ensure that any listing or advert includes the licence number and a valid Energy Performance Certificate (EPC) rating (where this is required by building standards legislation). They must also ensure that any listing or advert is consistent with the terms of the short-term let licence (e.g. the maximum occupancy condition).	There is no additional cost beyond the fee already paid to obtaining the licence number (which will be on the certificate). The licence number and the EPC rating will take up additional characters in any advert charged by character count (e.g. printed media). Estimate £20 annually[89] for longer print media adverts, where these are used.	£20	No premises.	All premises.	£20
15. Insurance The holder of the licence must, for the duration of the licence have valid buildings insurance, and valid public liability insurance for the duration of each short-term let agreement.	Estimate: £200 to £1000 annually for appropriate insurance cover. In some cases, the platform or letting agency will cover the public liability insurance.	£200 to £1000	No premises. However, buildings insurance is a contractual requirement from lenders for those with mortgages and normally taken out by owners. Public liability insurance is not a legal requirement but best practice.	All premises.	£0 for premises with insurance already. £1,000 for larger buildings with no insurance.

Mandatory conditions at paragraphs 16 and 17 of schedule 3 set requirements around the payment of fees (paragraph 16) and an obligation not to provide false or misleading information (paragraph 17). These do not impose any additional costs or effort on the host.

Annex C1: Mandatory conditions: planning

Planning permission for change of use

A planning consent for a change of use might be expected to cost the applicant in the region of £630 to £1000. This assumes:

• the application relates solely to change of use (without any physical alteration to the appearance of the building); and
• the application does not raise unusual issues.

The Scottish Government's estimate of costs breaks down as follows:

The planning application fee (set nationally)	£401
Search of title deeds and location plan of the property through Registers of Scotland (including VAT)	£36
Completing the change of use application through the Planning Portal by the applicant (2.5 hours)[90] OR	£42 OR
Completing the change of use application through the Planning Portal by a professional (based on 2-3 hours work)	£300 - £350
Advertisement costs	£150 - £200

A straightforward change of use application would generally be capable of being prepared by the applicant and should not require significant professional advice or input.

There may be some costs if the application has to be advertised in the local press. Not all applications require a press advertisement. On receipt of an application, the planning authority is required to send written notification to all neighbouring properties within 20 metres and it is only if this cannot be done (i.e. there is no postal address for the neighbouring land to which the written notification can be delivered) that a press advert would be required. The costs of written notification are included in the application fee, the costs of press advertising are the actual cost of inserting the advertisement in the newspaper. Advert costs are not part of the application fee and would be invoiced for separately by the planning authority as and when required.

The actual costs for an individual advertisement would vary considerably. Where the advertisement was for a single planning application they could be higher. However, if the advertisement covers applications for several properties (not necessarily just short-term let applications), the cost of the advertisement would be split between the various applicants accordingly. An advert may be more likely to be required in a rural area where the surrounding land is less likely to have a postal address.

Architects drawings and plans of proposed work would not generally be required for a change of use, so the costs of such work are not listed.

In many cases, under current planning legislation, a change of use from a dwellinghouse to a short-term let would be a material change of use requiring a planning application. It is for the relevant planning authority to consider on a case-by-case basis whether or not a planning application is required. This will remain the position outside control areas. Within control areas, only a minority of properties would require a planning application that did not do so before. For many properties within a control area, the planning costs are not therefore a direct consequence of the designation of the area as a short-term let control area.

Application for a certificate of lawfulness of use or development (CLUD)

Application for a CLUD might be expected to cost the applicant in the region of £520 to £900. This assumes:

the application relies on demonstrating more than 10 years of prior continuous use as a short-term let; and

the application does not raise unusual issues.

The cost breaks down as follows:

The application fee (set nationally)[91]	£401
Search of title deeds and location plan of the property through Registers of Scotland (including VAT)	£36
Completing the change of use application through the Planning Portal by the applicant (2.5 hours) OR	£42 OR
Completing the change of use application through the Planning Portal by a professional	£300 - £350
Gathering evidence to support the application (2.5 hours)	£42

The information that would be required to be submitted in support of a CLUD application is different to that required for a planning application. In applying for a CLUD, the applicant is submitting evidence that the use does not require a planning application. The question to be considered is whether that proof is sufficient to justify a CLUD. Such evidence would generally take the form of receipts for guests staying at the accommodation, advertising etc.

A CLUD application does not have the same notification requirements as a planning application so there is no potential for advertising costs.

In terms of preparing the evidence and the application itself, there is potentially more requirement for the applicant to spend time gathering information from their records and corroborating from other sources.

Annex C2: ASSC survey on mandatory conditions

The ASSC conducted a snap survey over 22 hours, closing at 5.00 pm on 8 November 2021. The results have been provided to the Scottish Government but not checked or verified by the Scottish Government.

The ASSC reported that their survey generated 336 responses from businesses in 26 out of 32 local authorities. Of these, 53% were from members of the ASSC and 47% responses were from non-members.

Respondents indicated that their business was based in the following local authority areas:

Local Authority	Number of Respondents
Aberdeen City	0
Aberdeenshire	7
Angus	7
Argyll & Bute	40
Clackmannanshire	0
Dumfries & Galloway	18
Dundee City	1
East Ayrshire	2
East Dunbartonshire	0
East Lothian	3
East Renfrewshire	1
Edinburgh City	26
Eilean Siar	9
Falkirk	1
Fife	14
Glasgow City	5
Highland – Isle of Skye / Lochalsh	37
Highland – Other	68
Inverclyde	0
Midlothian	0
Moray	13
North Ayrshire	23
North Lanarkshire	1
Orkney	8
Perth & Kinross	23
Renfrewshire	0
Scottish Borders	12
Shetland	5
South Ayrshire	4
South Lanarkshire	2
Stirling	3
West Dunbartonshire	1
West Lothian	2

* Some respondents have properties across a range of local authority areas.

Respondents classified the location of the property or properties as follows:

Classification	Number of respondents	Percentage
Urban	48	14.3%
Suburban	15	4.5%
Semi-Rural	66	19.6%
Rural	140	41.7%
On an Island	65	19.4%
Pan Scotland	2	0.6%

The vast majority of respondents identified that they came from rural areas / islands (81%).

Respondents declared their approximate average annual turnover as follows:

Banding	Number of respondents	Percentage
less than £5k	7	2.1%
£5 - 10k	34	10.1%
10-20k	102	30.4%
20-30k	63	18.8%
30-50k	46	13.7%
Over 50k	84	25.0%

Respondents were asked to estimate the approximate annual cost for a range of measures, including the mandatory conditions and other costs (PPL PRS Music Licence, MPLC Audiovisual Licence and Food Safety Hygiene). The ASSC averaged out the costs across the number of respondents for each category and arrives at a figure of £3,000 per annum as an average cost across those categories:

Measure	Responses	Average Cost
Fire Safety: Hardware	235	£194
Fire Safety: Maintenance	197	£194
Carbon Monoxide Alarm	197	£91
Gas Safety Certificate	139	£136
Electrical Installation Condition Report (EICR)	183	£257
Portable Appliance Testing (PAT)	228	£189
Legionella Risk Assessment	93	£75
Energy Performance Certificate (EPC-12)	124	£274
Private Water Supply	122	£407
PPL PRS Music Licence	13	£42
MPLC Audiovisual Licence	21	£17
Food Safety Hygiene	30	£26
Holiday Let Buildings & Public Liability Insurance	298	£1,067
Total Average Cost		£2,969

There are a few factors that might skew this result: firstly, hosts and operators with higher costs may be more likely to respond to such a survey; the respondents are weighted towards rural operators, who may have higher costs; not every respondent incurs every cost (e.g. not all premises have gas) but all the costs are summed to make the total; and some respondents may have included one-off costs, or costs incurred less frequently, as annual costs.

Respondents identified the additional costs of business (over and above those listed in Annex C), including:

• Non-Domestic Rates
• Water supply (approximately £100 per month for a 5 bedroom self-catering house)
• Waste removal (approximately £500 per annum)
• Chimney sweeping
• First aid kit (and defibrillator)
• TV Licence (£154 per annum)
• GDPR ICO registration
• Marketing.

Respondents also highlighted extra cleaning costs associated with COVID-19 (length of clean and specialist cleaning supplies) and rising business costs from utilities, suppliers and insurance.