Short-term lets: letter to MSPs

Colleagues

As the licensing application deadline for existing short term lets approaches, you may be contacted by hosts/operators and other stakeholders seeking information and support in applying to their local councils’ schemes. I appreciate that this is a new requirement for operators and I am writing to provide you with some key information that may be useful to you when engaging with your constituents about Scotland’s short-term let (STL) licensing scheme. This can be read alongside a recent SPICe blog, which was published in July this year.

In January 2022, Parliament approved legislation introducing STL licensing, following three years of consultation and development. Many other countries across the world are considering how to appropriately regulate the growth of the STL sector, with some imposing strict limits on use – noting the important role that STL accommodation has in Scotland’s tourism sector, the Scottish Government scheme seeks to strike a balance, with the purpose of licensing being to ensure short-term lets are safe and managed in a way which does not impact on quality of life for people in their neighbourhood. Licensing safeguards the reputation of good quality, responsible hosts and provides assurance to guests and local communities that short-term lets are well-managed and comply with a consistent set of standards.

Transitional arrangements

Licensing authorities began administering local schemes on 1 October 2022 and since that date new hosts must now obtain a licence before they take bookings or receive guests. Operating without a licence is a criminal offence and the maximum fine is currently £2,500.  

There are transitional arrangements for ‘existing hosts’, i.e. those who used their accommodation as a short-term let before 1 October 2022. These existing hosts are allowed to continue operating without a licence after 1 October 2022 but there is an deadline by which they must submit their applications. In March 2023, Parliament amended the date of this deadline by six months to 1 October 2023. This means existing hosts have now had just under two years to ensure they comply with licensing conditions and a year to prepare and submit their applications. Key features of the transitional deadline of 1 October include:

• Existing hosts must apply before 1 October 2023 if they wish to continue taking bookings and receiving guests while their application is being processed.
• They do not need to have received their licence by this date – local councils expect to process applications as quickly as possible and have been working closely with applicants where clarification is needed on any aspect.
• This transitional arrangement is in place to support operators to do business while their application is considered - it is in their best interests to apply now as any late applications cannot take advantage of the transitional period to continue trading.  
• If they do not apply before 1 October 2023 existing hosts will need to cease operating. If they subsequently apply for a licence they will be treated as a new host and must wait until this is granted before they take bookings and receive guests.

Application levels

• The links to each councils’ short term let pages are available via a dropdown box on the my.gov website and I would ask you to share this information to encourage STL hosts in your constituency to take advantage of the transitional arrangements detailed above.
• As of 5 September, 27 council public registers across Scotland showed that 3,537 licences had been granted, and none refused, with a further 3,643 applications under consideration.
• Councils advise they are answering high levels of enquiries and the rate of applications is also increasing day on day as the deadline approaches.

Fees and costs of compliance

• Councils must charge fees that are reflective of the costs incurred in processing the application and associated administration.
• The average (median) cost for a 3-year licence across Scotland varies from around £260 for home sharing of a double room up to £520 for secondary letting with a maximum occupancy of 10.
• On an annual basis, the average licence fee therefore varies between £90 and £170 for these categories.

• Many operators should not need to incur significant costs in complying with the mandatory safety aspects of the scheme especially if they are already running a business, which is in compliance with existing relevant legislation.

Planned updates to the scheme

Since taking up my ministerial portfolio I have engaged with, and listened carefully to representations from, all stakeholders, including the STL sector. I am also working with my ministerial colleagues across government, recognising the role that a well-managed, high quality short term let sector has in Scotland’s tourism and visitor economy.

We have been responsive and made several amendments during development of the legislation such as removing overprovision powers, compromising on public liability insurance requirements and reducing the requirements on hosts to notify neighbours of their licence application. Earlier in 2023, we also brought forward an amendment that was approved by Parliament providing a six month one-off extension to the application deadline for existing hosts.

In addition, we’ve worked and will continue to work closely with licensing authorities to resolve industry concerns including local approaches to floor plan requirements and additional conditions.

I am currently exploring other areas, including making it more straightforward to transfer a licence to a new operator and I will, of course, update Parliament in due course.

Planning

It is the responsibility of any business to check that they have all the necessary consents to operate lawfully. This includes planning permission, which is required for material changes of use, including a material change from a dwellinghouse to short-term let accommodation. This is a very long-standing legal requirement[1]. Whether a material change of use has occurred and therefore requires planning permission is something for planning authorities to consider on a case-by-case basis. 

The position is slightly different in short-term let control areas (STLCAs)[2]. In these locations, from the point of designation, a change of use from a dwellinghouse to short-term let accommodation is, subject to certain exceptions, automatically deemed to involve a material change of use requiring planning permission. You may find the following helpful to understand the interaction between licensing and planning within and outwith control areas.

STL licence applications that are outwith control areas:

• Section 26 of the Town and Country Planning (Scotland) Act 1997 applies (i.e. material changes of use require planning permission, judged on a case-by-case basis). Councils upon receipt of licence applications will notify the local planning authority as a consultee.
• The licensing application is likely to continue being processed and will be determined separately to the planning application.

STL licence applications that are within control areas:

• After designation of a STLCA, changes of use from a dwellinghouse to a short-term let[3] are deemed to involve a material change of use requiring planning permission (section 26B(2) of the Town and Country Planning (Scotland) Act 1997).
• To allay any fears, planning permission does not need to be sought if the property is a landlord’s (operator’s) principal home, or a part of their principal home – so for example where someone intends to let out a room in their home as a STL.

• Where the change of use of a dwellinghouse to a short-term let took place before the designation of the STLCA, applicants should consult their local planning authority to check requirements.
• If a dwellinghouse has been used as a short-term let continuously for at least the last 10 years, a certificate of lawful use or development (CLUD) can be applied for and if granted will be immune from enforcement action.
• If planning permission is required, the licensing application will be placed on hold for up to three months while the host makes a planning application. (Existing hosts that make a licence application before 1 October 2023, will not be inconvenienced by this pause as they can continue to operate until their licence application has been determined).

More information can be found in the following links:

• Part 1 and Part 2 STL licensing guidance
• Planning Circular 1/2023: short-term lets and planning
• Short term lets: planning guidance for hosts and operators
• Short term let planning control areas
• Certificates of lawfulness, and appeals process

Parliament approved the introduction of short term lets regulation in recognition of significant growth and change; in light of community pressures and to safeguard the reputation and quality of the sector. As outlined above, it is strongly in the interests of short term let hosts to go through the application process as many thousands have already done. I hope that you will support and encourage hosts to apply, especially existing hosts that must apply by 1 October 2023 to qualify to continue operating until their licence is determined. 

Paul McLennan

Minister for Housing