Short Term Lets Working Group letter from Cabinet Secretary: 20 August 2021

Dear working group member

I am writing to you, following the resignations from the working group of members representing the Association of Scotland’s Self-Caterers, Airbnb, the Scottish B&B Association, and the UK Short Term Accommodation Association at the fourth meeting of the group on 4 August 2021.

I would like to express my disappointment at this development, given the level of engagement we have had with all members, including these organisations, and our efforts to respond to your concerns and make changes to legislation and guidance, where they do not detract from the purpose of the licensing scheme.

We have been clear since January 2020 that regulation of short-term lets would include a licensing scheme and the focus of the working group has always been on refining and implementing that plan. I know that some members wanted to see the Scottish Government move to a registration scheme and had backed proposals to make registration an exemption from licensing. We are not going to do this, for reasons which I explain below.

However, we remain committed to getting this legislation absolutely right. We received more than 1,000 responses to our recent consultation. We want to take the time to review all the consultation responses carefully to see what we can do to address genuine stakeholder concerns.

For this reason, I have written to the Local Government, Housing and Planning Committee at the Scottish Parliament to advise that we now intend to lay the Licensing Order in November, rather than September. You can find a copy of that letter on our website: Short-term lets: regulation information. As set out in that letter, we are not changing the implementation timetable.

I also want to take this opportunity to correct some misunderstandings and to reiterate this government’s commitment to meaningful consultation and engagement.

Purpose of the legislation

The Scottish Government considers regulation of short term lets to be vital in balancing the needs and concerns of residents and communities with wider economic and tourism interests.

We know that short-term lets can offer people a flexible and cheaper travel option, and have contributed positively to Scotland’s tourism industry and local economies across the country. But we want to ensure the safety of guests in, and neighbours of, short-term let accommodation across Scotland; many hosts and operators will take their responsibilities seriously, but some do not. We also know that in certain areas, particularly tourist hot spots, high numbers of lets can cause problems for neighbours and make it harder for people to find homes to live in. We know that it is not just residents and communities in Edinburgh that are raising concerns. We also have heard from residents in Glasgow, Ayr, Applecross (Highlands and Islands), Loch Lomond and Trossachs National Park, Isle of Harris, North Berwick, St Andrew’s and West Linton, for example, about a range of issues, including safety.

Our first public consultation ran from April to July 2019 and we engaged through events around the country. We consulted again on detailed proposals for a licensing scheme and control areas in autumn 2020. In autumn 2020, we engaged with stakeholders through 20 virtual workshops and events at which over 400 people attended. Our third consultation on draft licensing legislation closed on 13 August 2021. We received over 1,000 responses to each of the three consultations.

The Licensing Order will establish a short-term lets licensing scheme across Scotland. The purpose of the licensing scheme is to ensure short-term lets are safe and address issues faced by neighbours; to facilitate licensing authorities in knowing and understanding what is happening in their area; and to assist with handling complaints effectively.

The principal component of our licensing scheme is a mandatory set of safety standards. Many hosts will already be following these standards as a matter of compliance with existing law or best practice. We do not consider them to be onerous. Safety matters, whether someone is sharing their own home or letting a portfolio of properties, in rural Skye or in central Edinburgh. For this reason, the basic scheme applies across the whole of Scotland.

Role of the working group

The stakeholder working group was established to develop guidance on the licensing scheme and control areas that was clear, comprehensive and easy to understand. As part of this, we also set out to allay any unfounded concerns and actively explore solutions to any real issues, with a view to making any necessary adjustments to the Licensing Order.

Working group members made a range of suggestions for adjustments to the Licensing Order, as well as providing very significant contributions to improving the guidance. We took these on board, where they did not detract from the purpose of the licensing scheme set out above, and published the draft Licensing Order for consultation on 25 June.

Working group engagement

The Scottish Government has responded to concerns expressed by working group members. Firstly, the 2020 Licensing Order and draft guidance were revised, following careful review of comments made by working group members. Secondly, the revised Licensing Order was published for consultation, providing another chance to make further changes and to consider the draft guidance against the revised legislation. Thirdly, some stakeholders asked for the opportunity to be able to comment on the Business and Regulatory Impact Assessment (BRIA) and this draft BRIA was also part of the consultation.

Some stakeholders have expressed concerned that their views are not reaching Ministers. I, or Mr McKee MSP, Minister for Business, Trade, Tourism and Enterprise, have met with the Scottish Guest House and B&B Alliance, Airbnb and the ASSC over July and August. Ministers are hearing stakeholder concerns reported by officials and directly from stakeholders. I am keen to find solutions but they must be rooted in changes to the licensing legislation which we have committed to introduce, rather than proposals for a registration scheme.

Registration scheme proposals

The terms of reference of the working group (February 2021) were clear that, “It is outside the scope of the working group to debate whether to implement a licensing scheme or control areas.” Even so, we have considered the proposals for registration.

With regard the relative merits of registration and licensing, the Scottish Government has set out its position in the consultation paper and in more detail in the draft Business and Regulatory Impact Assessment.
We understand the policy intention of the proposals for registration would be to ensure compliance with (most of) the mandatory conditions set out in the licensing scheme. However, without seeing a draft registration scheme (which is proposed would be made under the Development of Tourism Act 1969 and would require a statutory instrument to give it effect), it is not clear how they would be enforced. It does not appear that the proposals for registration would include any provision for: a fit and proper person test; additional conditions to be attached to the registration; or to limit numbers through any application of an overprovision policy. These are important components of the licensing scheme which a parallel registration scheme would undermine.

Mandatory safety measures

The Licensing Order requires hosts and operators to implement some basic safety measures. On the one hand, we are told that many hosts and operators are already complying with these requirements (as a matter of best practice or under existing law). On the other hand, we are told that they are onerous. We will be reviewing consultation responses for specific suggestions for revisions to address points of concern. We listened to concerns around the financial burden that the imposition of energy efficiency standards would have placed on short-term let operators, as they recover from the impact of prolonged business closure due to the COVID-19 pandemic, and removed that requirement from the consultation draft.

Inclusion of guest houses

In the 2020 Licensing Order, we explicitly excluded guest houses, boarding houses and hotels. Some stakeholders raised concerns about the inclusion of so-called “traditional” bed and breakfast accommodation. The Scottish Government always intended bed and breakfasts to be in scope. Our 2019 consultation proposed excluding licensed hotels and B&Bs, and self-catering properties on their premises.

We have revised schedule 1 of the Licensing Order to address the previous anomaly around excluding guest houses, boarding houses and hotels, but including bed and breakfasts. Guest houses, boarding houses and some hotels can be variants of home sharing and should not be automatically excluded. The exclusions have been simplified to:

• hotels with planning permission, and
• premises licensed under the Licensing (Scotland) Act 2005.

In broad terms, schedule 1 makes provision to exclude everything other than the use of houses, flats and unconventional accommodation. However, a property is not excluded simply because of how it is labelled. For example, a house used as a hotel, guest house or bed breakfast is not excluded by being labelled as such, unless excluded specifically by provision within schedule 1.

There is no policy justification or obvious legal mechanism to differentiate between “traditional” B&Bs and other forms of home sharing. David Weston wrote an article for Direct Line (What is the difference between a B&B, guest house and hotel?) which explains that the classification is largely determined by the proprietor: “We have always been called the B&B Association – even though many of our members say they run guest houses or hotels. There is no legal dividing line between the three, and no generally accepted rule either… How any individual establishment is named is in most cases historic, rather than the result of a measured decision.”

If we did not include guest houses in the scope of the Licensing Order, then this would leave the door open for “traditional” B&B owners and Airbnb home sharers to relabel their premises and avoid licensing. We are willing to make changes to the licensing legislation to address the concerns of hosts in B&Bs and guest houses, and indeed Airbnb home sharers, but we need to know specifically where the issues lie.

Scope of licensed activity

Licensed activity extends to the making of an agreement to let the accommodation, as well as the stay itself. This means that taking bookings is a designated activity requiring a licence. However, hosts and operators can advertise a property prior to being granted a licence.

Existing hosts and operators are not affected. They can continue to accept bookings prior to the grant of a licence, provided they apply for a licence before 1 April 2023.

Overprovision

Overprovision only applies to secondary letting. Concerns about overprovision are not relevant to home sharing or “traditional” B&Bs offering accommodation in the owner’s home.

Overprovision was included within the draft Licensing Order published in December 2020. The Law Society provided detailed feedback following publication of the 2020 Licensing Order indicating that overprovision requirements should be clearly set out in the Licensing Order. They suggested that overprovision requirements should follow the liquor licensing process, requiring local authorities to develop, and consult on, a coherent policy.

We made these changes and provided extensive draft guidance to local authorities on overprovision, including the need to develop an overprovision policy statement and factors to consider in determining an overprovision policy. This provides hosts and operators with more clarity, rights and protections than they had in the 2020 Licensing Order.

Overprovision powers will not be used by local authorities unless it is really necessary to do so. Communities, local authorities and Scottish Government all support responsible and sustainable tourism because of the economic and social benefits it brings.

We are aware of some stakeholders’ concerns around the use of overprovision powers and will be considering their points carefully.

Business and Regulatory Impact Assessment (BRIA)

Our draft BRIA was published in June, alongside the Licensing Order, for consultation. We will be reviewing the BRIA carefully, informed by consultation responses and other information provided to us and will pay attention to the concerns raised by stakeholders. Scottish Government policy officials and economists will be engaged in assessing all available information. We are speaking with Airbnb, the ASSC and Fife Council, in particular, about their concerns around the levels of fee and impact on the tourism sector, to inform the final version of the BRIA. My officials would be happy to engage with any other members as necessary to ensure that the data and assumptions underpinning the BRIA are as accurate as possible.

Next steps

We would like to continue to engage with all current and former members of the working group. I want to listen, be constructive and to get this legislation absolutely right. I want to keep costs and bureaucracy to a minimum and to finalise guidance that is comprehensive,clear and helpful and ensures that we strike the right balance between the needs of residents and communities and the tourism and wider economy.

I am pragmatic about how we engage; my officials will be in touch where they need further clarification in respect of points made in consultation responses, meetings or correspondence.

We will be laying licensing legislation. I urge you to work with us to finalise and implement it effectively.

SHONA ROBISON