Short-term lets: consultation

3. Definition of Short-Term Lets

Definition of a short-term let

3.1. There is currently no statutory definition of what constitutes a short-term let in Scotland. The term is widely used but has different meanings depending on the speaker and the context.

3.2. Where a dwelling is available for let for 140 days or more in the financial year, it is classified as self-catering holiday accommodation, exempt from Council Tax^[13] and becomes instead liable for non-domestic rates. This requires that it be entered by the local Assessor on the Valuation Roll and given a "rateable value" which is the basis for calculating the non-domestic rates liability.

3.3. Further, the rental income of "Furnished holiday lettings"^[14] (i.e. available for letting for at least 210 days, and commercially let for at least 105 days in the year) qualifies for special tax rules e.g. Capital Gains Tax reliefs for traders.

3.4. For a short-term let to take place, a host offers short-term accommodation to one or more guests, i.e. it does not become the main residence of the guest. Short-term lets are not private residential tenancies^[15], which require that the tenant occupies the property (or part of it) as their only or principal home. Therefore, guests do not have the same rights in law as tenants.

3.5. In this consultation paper, we will use:

"host" to mean the person or company providing accommodation for short-term letting, including commercial landlords; and

"guest" to mean a person taking the accommodation as a short-term let.

3.6. There are three ways in which a host might make accommodation available to a guest^[16]:

a) the letting of a room or rooms to the guest with the host in residence - "sharing";

b) the letting of a room or rooms or the entire property where the host normally lives, when the host is absent (frequently this is when the host is on holiday in another person's home) - "swapping"; or

c) the letting of a room or rooms or the entire property, where the host does not normally live and the host is absent - "secondary letting".

3.7. Each of these three ways of hosting has its own advantages and challenges. All could potentially be regulated, although regulations may require to be tailored to each way of hosting.

3.8. Similarly, a regulatory framework could encompass all types of housing which might be offered as accommodation, from tenement flats to detached houses, whilst making differing provision for different types.

3.9. There is already a well-established and comprehensive regulatory framework for the Private Rented Sector which includes landlord registration, repairing standard requirements, licensing of Houses in Multiple Occupation and regulation of letting agents. A regulatory framework for short-term lets should complement, not duplicate, this framework.

3.10. The Scottish Government is separately consulting on draft regulations to address a specific issue brought to our attention by local authority licensing teams regarding Houses in Multiple Occupation - the use of accommodation by contract and transient workers. The aim of the draft regulations is to afford the same health and safety rights as those who live in a shared rented property as their only or main residence, to contract and transient workers who often have no choice where they stay when working away from home. Such accommodation could include holiday properties, both self-catering and bed and breakfast, where 3 or more unrelated workers are residing in a property in a particular way. This consultation can be viewed on the Scottish Government website.^[17]

3.11. Equally, the Scottish Government would not wish to regulate occasional stays of friends and family. Therefore, for the purpose of considering the various options for regulation, we would propose that both of the following conditions must be met in order for the arrangement to be considered a "short-term let":

a) The accommodation is made available for use for letting for a cumulative period of 28 days or more in any rolling period of 365 days. This might mean, for example, that it is advertised as being available to let.

b) At least one of the lets commencing in the same rolling period is not a private residential tenancy in terms of section 1 of the Private Housing (Tenancies) (Scotland) Act 2016.

3.12. Condition (b) would normally mean the accommodation had been let at least once for a period of less than 28 days. It is not necessary to make reference to assured tenancies and short assured tenancies (which do continue to operate in respect of tenancies that started before 1 December 2017) because this condition is concerned only with new lets.

3.13. This definition, and any system of regulation, could encompass any use to which the guests put the property (i.e. including letting for holiday or for work purposes).

Exclusions

3.14. There are many circumstances where people stay for a short or unpredictable period outwith their primary residence. The following are not considered to be within scope of short-term letting for the purposes of this paper:

a) licenced hotels and B&Bs and self-catering properties on their premises,

b) women's refuges,

c) homeless hostels and other temporary accommodation for homeless people,

d) accommodation for asylum seekers,

e) child or adult care homes and other council premises,

f) student halls of residence (whether used by students or others),

g) hospitals, and

h) prisons.

3.15. With regard to (a) above, we are not proposing any new regulatory framework for the hotel and B&B industry as part of this consultation.

3.16. Throughout the rest of this paper, short-term let is defined as in paragraph 3.11, unless the context demands otherwise, for example in reference to regulatory environments in other countries.

Question 2 Should a regulatory framework distinguish between sharing, swapping and secondary letting?

Question 3 Should the rules be capable of being different depending on the type of accommodation? For example, to distinguish between tenement flats and detached houses.

Question 4 Do you have any comments on any other aspect of the definition of short-term lets?

Platforms and hosting service providers

3.17. Short-term lets are not a new phenomenon. They have always been available but they have become much more prominent and popular through the advent of Airbnb and other platforms which have facilitated hosts in reaching their potential markets.

3.18. In addition, a range of service industries have grown up around these platforms allowing hosts to outsource functions such as: meeting and greeting guests; cleaning; laundry; and security. Examples include AirSorted, BnBbuddy and Guestready, amongst others.This means a short-term let can range from an intimate experience of renting a room in a family house and eating with the host through to a very business-like arrangement with a commercial host with no personal contact at all.

3.19. In this paper, we will use:

"platform" to mean an online marketplace, advertising or brokering service, such as Airbnb, booking.com and others, allowing hosts to offer properties for short-term lets; and

"hosting intermediary" to mean a person or company allowing hosts to outsource some or all of their functions.

Other perspectives

3.20. From the literature reviewed, it is clear that there is not one unique and universally-accepted definition of short-term lets and peer-to-peer accommodation in Scotland or across the world. Different definitions are used in each city/country, often based on the number of nights that short-term lets are allowed to be rented out, see Annex B - Regulation Outwith Scotland on regulations on short-term lets implemented elsewhere).

3.21. A report on short-term lets by Edinburgh City Council^[18] argued that "Short term letting has no statutory definition and can vary widely, from periodic lets such as those during the Festival period in August, to properties purchased and operated on a commercial basis all year round. In addition, some operators of short term lets continue to reside in the property (for example, an occupier renting out a room whilst they remain in residence) whereas other short term lets are solely occupied by visitors and not used as a place of residence".

3.22. According to a report^[19] by Frontline for the Association of Scotland's Self-Caterers, there are four different ways in which short-term lets are made available i Scotland:

• Collaborative economy short-term lets via online platforms, such as Airbnb, booking.com, HomeAway and HouseTrip (largely non-serviced accommodation);
• Traditional self-catering (non-serviced accommodation);
• Serviced apartments (serviced accommodation);
• Aparthotels, i.e. furnished apartments with hotel services (serviced accommodation).

3.23. Short-term lets are considered for the purposes of this paper to include 'peer-to-peer accommodation'. 'Peer-to-peer' relates to connecting "individuals or communities via online platforms"^[20]. A number of other definitions of 'peer-to-peer accommodation' have been offered:

• PwC^[21] - "households sharing access to unused space in their home or renting out a holiday home to travellers".
• The Scottish Expert Advisory Panel Report on the Collaborative Economy - peer-to-peer accommodation includes three types of short-terms lets: privately owned houses or individual rooms; privately owned holiday homes; and commercial lettings.

3.24. Both the Expert Advisory Panel and PwC reported that peer-to-peer accommodation is the largest sector of the collaborative economy in Europe by total transaction value (€15.1 billion).

3.25. Research commissioned by the Association of Scotland's Self-Caterers (ASSC)^[22] used the same definition of self-catering as in the International Passenger Survey and the Great Britain Tourism Survey.

"A self-catering property needs to meet the following two criteria:

• a property that is available to rent by visitors on a short-term basis for the purposes of a holiday or a short break
• a self-contained unit with its own cooking facilities, which may form part of a larger property, or be grouped with other units on the same site".