Short-term lets – licensing scheme and planning control areas: consultation analysis

7. Licensing Order under the 1982 Act

7.1. There were 1016 responses to the question about any issues with the proposed licensing order as set out in chapter 6 of the consultation paper, and how to resolve them.

7.2. As with chapter 6, the issues raised by consultees are reviewed in the order the proposals were presented in the consultation paper.

Coming into force and transitional arrangements

7.3. The consultation paper proposed at paragraph 6.4 that, subject to the Scottish Parliament approving the Licensing Order, local authorities would be able to implement licencing schemes from 1 April 2021. The Licensing Order will come into force on 1 April 2021. Nobody is required to do anything differently on that date.

7.4. The consultation paper also set out transitional arrangements and proposals for grace periods at paragraphs 6.84 to 6.89. These are discussed in more detail in chapter 4 of this report.

Mandatory conditions

7.5. Paragraphs 6.6 to 6.35 of the consultation paper set out the mandatory conditions for the licensing scheme which would apply across Scotland (i.e. in all local authority areas) and for all types of short-term let:

Consultation proposal:

The consultation paper set out a range of mandatory conditions for short-term lets licences across Scotland.

Issue:

Consultees have pointed out some possible improvements to the way these are framed. Some of the suggestions are fairly technical and others are more significant. The more significant ones we are proposing to take forward are set out below.

Some people noted that title deeds often prohibited the use of residential property for business purposes or for short-term lets, but this was difficult to enforce. We are not proposing to make reference to title deeds in the mandatory conditions. However, it would potentially be a relevant ground for objection by a neighbour.

Issues in respect of the mandatory planning condition, tax condition, mortgage and tenancy condition and non-payment of fees are covered at paragraphs 7.6, 7.7 and 7.11, respectively.

Resolution:

Amendment.

We will amend the mandatory conditions to:

• add a new condition relevant to properties with private water supplies;
• set the minimum level of public liability insurance at £5 million; and
• make other modest improvements to, for example, electrical safety provisions.

7.6. Paragraph 6.34 of the consultation paper set out other mandatory conditions on hosts and included a condition on planning permission:

Consultation proposal:

The consultation paper proposed a mandatory condition for a licensing application: that the host must confirm they have applied for, or obtained planning permission (if required), that it remains current and that they are complying with any planning conditions.

Issue:

Through the consultation process, a concern has emerged that the proposal requiring planning permission or confirmation that planning permission is not required as part of a licence application might have the unintended effect of requiring planning permission across Scotland. (Proof that planning permission was not required is likely to result in an application for a certificate of lawful use or development. A host might struggle to rely on previous third party advice that planning permission was not required.)

This defeats the purpose or value of control areas. A national requirement for planning permission is not desirable, in part because of the large number of planning applications that might generate.

Resolution:

Amendment.

We will modify the mandatory licensing condition to limit it to control areas. In other areas, we will not require local authorities to ask about planning permission on licensing application forms (although they may do so if they wish, using their discretionary powers to set additional conditions).

7.7. Paragraph 6.34 of the consultation paper set out other mandatory conditions on hosts and included conditions on taxation and mortgage or tenancy terms:

Consultation proposal:

The consultation paper proposed mandatory conditions for a licensing application: that the host must confirm that they are aware of their obligations to pay tax on profit earned from short-term lets, as well as any local taxes for which they are liable; and the host must confirm that letting the accommodation would not breach any mortgage lending conditions (or tenancy terms), if applicable.

Issue:

Where the host is a tenant of the accommodation, the licence application will require the host to demonstrate that they have the owners’ permission. This makes the tenancy condition unnecessary as a separate mandatory condition. With regard to home owners with mortgages and taxation, and informed by comments made during consultation, we are concerned that this goes beyond the licensing purposes of the 1982 Act.

Resolution:

Amendment.

We will not include reference to taxation or mortgage or tenancy agreements as part of the mandatory licensing conditions. We intend to set out in guidance for hosts and platforms that hosts should be aware of these obligations and satisfy themselves that they comply with them ahead of submitting an application for a licence.

7.8. A revised list of the mandatory requirements, and whether they are likely to require verification or would be self-declaratory, is set out at Annex C.

Other licence conditions which local authorities may require

7.9. Local authorities will have discretionary powers to add licence conditions to address local needs and concerns. These conditions can be applied generally (to all licences), in certain circumstances (e.g. tenement buildings) and individually to a specific licencee (though this is only likely if problems have arisen). Paragraphs 6.36 to 6.60 of the consultation paper set out some conditions which local authorities might want to consider applying.

7.10. In terms of the approach to these discretionary powers to add licence conditions:

Consultation proposal:

We proposed that local authorities would have discretionary powers to add licence conditions to address local needs and concerns. These conditions can be applied generally (to all licences), in certain circumstances (e.g. tenement buildings) and individually to a specific licencee (though this is only likely if problems have arisen).

Some local authorities might want to set out standard conditions (which must be published) which would apply to all short-term lets in their area (possibly differentiating between the different types of short-term let).

We set out the conditions which local authorities might want to consider applying.

Issue:

Some consultees highlighted potential issues with the way that some of the discretionary conditions were framed or whether they were appropriate at all. For example, allowing local authorities to require: guests to be met on arrival in the context of COVID-19; and some questioned whether some of the data for which local authorities could ask would mean that hosts would have to share commercial information.

Resolution:

Clarification.

Rather than setting out a menu of discretionary conditions in the Licensing Order, we will set out options that local authorities may wish to consider in guidance.

It is important the local authorities avoid arbitrary inconsistency in similar conditions across Scotland. If this approach does not work, we will bring forward an amending order setting out a menu of discretionary conditions in the next Parliament.

Fees

7.11. Paragraphs 6.61 to 6.65 of the consultation paper set out the powers for local authorities to charge fees to cover the establishment and running costs associated with the licensing scheme:

Consultation proposal:

The consultation paper proposed the option of a monitoring fee and the potential for it to be charged monthly (or on some other regular basis).

Issue:

Some consultees expressed concern over who chased late payment and how the payment would be recovered if a host was not paying their monitoring fee. There were concerns that this would create additional work for the local authority.

Resolution:

Amendment.

It will be a mandatory condition of a licence for the fees to be paid on a timely basis. This allows local authorities to take swift action on non-payment of a fee through suspension or revocation of the licence.

Application process

7.12. Paragraphs 6.66 to 6.90 of the consultation paper set out the application process for the licensing scheme. With regard to who is being licensed:

Consultation proposal:

The consultation paper used the terminology of host (applicant or licencee) and hosting intermediary (meaning a person or company allowing hosts to outsource some or all of their functions in respect of services provided to guests during their stay).

Issue:

A number of stakeholders highlighted that the terminology used in the consultation paper with regards to the definition of host, and relationships between the host, owner, operator and licencee, needs to be clearer.

A number of respondents to the consultation have objected to being referred to as “hosts”, especially members of the ASSC, who consider themselves to be professionals and not “hosts”.

Resolution:

Clarification.

We will clarify the provision in the Licensing Order so that fit and proper person checks are carried out on all those with an interest in the property, including:

• joint owners; and
• all those involved in the day-to-day management of the property.

We will not use the term “host” in the Licensing Order and will work with stakeholders on the right terminology for guidance.

Fit and proper person

7.13. Paragraph 6.83 of the consultation paper set out proposals for relevant information in considering whether an applicant was a fit and proper person to be licenced:

Consultation proposal:

The consultation paper proposed that relevant information included:

a) relevant criminal convictions (and police intelligence);

b) being disqualified from being a private landlord or having had letting agent or property factor registration revoked now or in the past;

c) having had a short-term lets or HMO licence revoked by any local authority;

d) having had an application for a short-term lets licence turned down by any local authority; and

e) providing false or misleading information in an application for a short-term lets licence, HMO licence or application to be a private landlord.

Issue:

Some consultees raised concerns about the proposed information and whether it was the right set of information. More comments were received on who was subject to the fit and proper person test (see paragraph 7.12 above).

Resolution:

Guidance.

Paragraph 5(3)(a)(i) of Schedule 1 to the 1982 Act requires a licensing authority to refuse an application if, in their opinion, the applicant is not a fit and proper person to be the licence holder. We will set out the grounds for what constitutes a fit and proper person in guidance, rather than in the Licensing Order, not least so that it does not become an exhaustive, prescriptive list.

We do not see any issues with the proposed grounds which are in line with, for example, checks on letting agents prior to registration.

Notification requirements

7.14. Paragraph 6.69 of the consultation paper proposed that the applicant needed to notify neighbours within a 20 metre distance of the property, including all residents on a tenement stair and neighbouring tenement stairs. The consultation paper also proposed at paragraph 6.70 that, where planning permission was also required, local authorities should have the power to combine the notification requirements so that neighbours are not notified twice about the same proposal.

Consultation proposal:

The consultation paper proposed that the host had to notify neighbours about a licensing application but not at renewal. The consultation paper wanted to facilitate local authorities in joining up their consideration of planning and licensing applications, in whatever way worked best in each area.

Issue:

Consultees pointed out that because we were proposing that the licence renewal application did not need to be notified to neighbours, it might be that neighbours were never told about a variation in the licence terms.

Furthermore consultees were concerned about: the criteria to be used to identify neighbours to be notified of a licence application; and what evidence would suffice to confirm notice had been served. There were concerns that some applicants or neighbours might make mischief around providing notice. It was suggested that the local authority might be better placed to give notice fairly and consistently and with less likelihood of challenge.

At one consultation workshop, it was suggested that community councils and development trusts should be notified of planning applications as statutory consultees.

Resolution:

Amendment.

We will give local authorities responsibility for notifying neighbours of a licensing application and any significant proposals for variation. Local authorities are already responsible for notifying neighbours about planning applications. We believe that this change would allow local authorities to make joint notifications about planning and licensing and streamline the handling of objections, should they wish to do so.

We will set out details about who should be notified about licensing or planning applications (beyond neighbours) in guidance.

Variation, suspension and revocation

7.15. A licensing authority can vary, suspend or revoke a licence in certain circumstances. Local authorities may do this without serving an enforcement notice if the seriousness of the breach justifies urgent action.

Consultation proposal:

The consultation paper sets out the powers for local authorities to refuse licence applications or suspend or revoke licences.

Issue:

One holiday letting agency flagged concerns about handling bookings that had already been made in the event that a licence application was refused. The same considerations apply in respect of suspension or revocation.

Resolution:

Clarification.

Any host who continues to operate can be fined for operating without a licence.

Reporting an offence is a matter for local authorities to manage. If a licence application is going to be revoked, or an application refused, we would expect the local authority to act reasonably with respect to any guests staying at the accommodation at this time, and work with the applicant or licencee to make suitable arrangements before any offence would be declared or reported. Obviously, if there was an immediate safety issue that would be different; each situation should be dealt with on its own merits.

We will set out in guidance that hosts should refund guests for any days paid for that could not be provided following refusal, suspension or revocation. This would allow guests to fund alternative accommodation. (We would expect the position in respect of refunds etc. for future bookings affected by refusal, suspension or revocation to be covered by booking terms and conditions in the same way as any other scenario in which the accommodation becomes unexpectedly unavailable, such as through fire damage or flood.)

Offences and fines

7.16. The consultation paper summarised the 1982 Act offences, including: operating a short-term let without a licence; non-compliance with the conditions of a licence; making unauthorised changes to a property; and making a false statement in an application or renewal application.

7.17. With regard to the level of fines:

Consultation proposal:

The consultation proposed to increase the maximum level of fine for operating without a licence to £50,000. It also proposed to increase the maximum level of fine to £10,000 for breaching a licence condition.

Issue:

In response to concerns expressed through consultation, we will increase the maximum level of fine to £10,000 for providing false information. For example, some property owners may make a false declaration about where they live, in order to apply for a home sharing or home letting licence, rather than a secondary letting licence. The incentive for the owner could be that the licence process may be more straightforward, cheaper and avoid the need to obtain planning permission (or the need to check with local authority whether planning would be required).

Resolution:

Amendment (through a Bill).

None of the three increases to the maximum level of fine can be made through secondary legislation^[13]:

• £50,000 for operating without a licence condition, as per the consultation paper;
• £10,000 for non-compliance with a licence condition, as per the consultation paper; and
• £10,000 for making a false declaration, a change from the consultation paper.

We aim to make these changes early in the next Parliament through provision in a suitable Bill.

7.18. With regard to imprisonment for operating without a licence:

Consultation proposal:

The consultation proposed to increase the maximum level of fine for operating without a licence to £50,000. It did not make any proposals for a custodial sentence.

Issue:

The consultation paper noted (at paragraph 6.117) that the secondary letting of a normal home can yield much more revenue than letting under the 2016 Act. It noted that, with “party mansions”, the revenue may be significantly higher.

Some consultees expressed concern that the level of fines would not be sufficient deterrent in some cases. They felt that the fines set out in the consultation paper may be significant and appropriate for most standard self-catering properties, but would not be sufficient to deter people operating party houses (either without a licence or in breach of a licence condition). It was noted that revenue from operating a party house could be in the region of £250k to £500k per year. It was suggested that only imprisonment might be a sufficient deterrent in extreme cases.

Various Acts have made amendments to the 1982 Act allowing imprisonment for operating without a licence for particular licence schemes only. There are powers in the 1982 Act to create a sanction of imprisonment for a period of up to 60 days and this could, in theory, form part of the Licensing Order. However, we will not add any provision in the Licensing Order at this stage as we did not consult on any form of custodial sanction.

Resolution:

Amendment in the next Parliament.

We will amend the Licensing Order in the next Parliament (through an amending order or provision in a suitable Bill) to make provision for imprisonment as a last resort for hosts who continue to operate without a licence. In the first instance, the most serious sanction would be a fine and revocation of the licence. Imprisonment could be useful where the potential revenue from continuing to operate without a licence exceeded the maximum fine and the host was continuing to operate in flagrant disregard of the law.

Renewal and notification of changes

7.19. Paragraphs 6.125 to 6.130 consultation paper proposed streamlining the renewal process as much as possible:

Consultation proposal:

We proposed to streamline the renewal process as much as possible, placing more emphasis on the monitoring and compliance process in terms of maintaining standards. We proposed that, only where the renewal application proposed significant changes to the licence, should it be necessary to notify neighbours.

Issue:

One consultee wanted to see an automatic renewal process.

Another expressed concern at any suggestion that a renewal application was not notified in the case that the terms of the licence were varied before renewal but not at renewal. In this case, the terms might change and neighbours might never be notified.

Resolution:

Amendment.

The 1982 Act allows for licences to be granted for up to 3 years. We will remove the three year limit on the duration of a licence at renewal. Licensing authorities must set out the circumstances in which they would grant licences for longer than three years on renewal.

We will move the burden of notification of neighbours on application from the host to the licensing authority, see paragraph 7.14 above. This will also apply to renewal applications. However, renewal applications will only have to be notified to neighbours where there has been a material change since the licence was granted.

Licencees must notify local authorities of any (proposed) changes that affect the conditions of their licence.

Temporary licences and exemptions

7.20. Paragraphs 6.135 to 6.138 of the consultation paper set out proposals to give local authorities the power to waive some of the licensing requirements in certain circumstances.

Consultation proposal:

The consultation paper set out proposals for temporary licences for short-term lets for a maximum of 28 days per year.

Issue:

A number of respondents raised issues with our proposals for the length of time a temporary licence could be granted. They have suggested that, whilst welcoming the inclusion of a temporary licence, the 28 day limit per year is not sufficient. Commonly cited examples included reference to the Edinburgh Fringe, where performers can require accommodation for 35-40 days.

The STAA welcomed the inclusion of temporary licences but suggested they should be more flexible, allowing the 28 days to be spread over the year, as this would make the process less burdensome for those home sharing or home letting. Others also asked whether local authorities would be able to specify dates for which home letting was or was not permitted to operate.

Consultees also raised concerns about excessive bureaucracy for: one-off home lettings (especially house swaps); and students being hosted by a family for learning English as a foreign language. There may be other examples which were not flushed out in consultation.

Resolution:

Amendment.

The consultation paper conflated provision on temporary licences with that for exemptions. The policy intention stated in the consultation paper was to give local authorities the flexibility to cater for large events through the provision of short-term let accommodation. Examples include sports championship competitions and arts festivals, where a large number of performers and spectators need to be accommodated for a short period of time. However, we wish to avoid loopholes whereby hosts (or even local authorities) could circumvent the mandatory safety conditions which are to apply across Scotland.

There are also circumstances where exemptions may be appropriate (some examples given in consultation).

However, we do not want to undermine (or allow local authorities to undermine) our mandatory safety conditions. We do not want exemptions or temporary licences to be used inappropriately as a backdoor to lower standards. For this reason, we consider they are only appropriate for short, continuous periods of time.

We will apply 1982 Act provision on temporary licences without amendment. The 1982 Act sets a duration of six weeks, which would address concerns in relation to the use of temporary licences for the Edinburgh Festival and other events that last a number of weeks.

Additionally, we will allow licensing authorities to be able to exempt, on application, the use of premises for short-term lets from the requirement to have such a licence:

a) in respect of any particular occasion; or

b) for a specified single continuous period not exceeding 6 weeks in any period of 12 months.

We consider that building in this flexibility, with guidance to local authorities on its use, reduces the risks of unintended consequences.

Planning policies would still apply. This is particularly relevant with regard to secondary letting, especially within control areas. For very large, one-off events (such as the Commonwealth Games, Olympics or COP26), the Scottish Ministers could make a special development order to grant planning permission for change of use for an area and to require discontinuance of use after a certain period.

Data sharing with platforms

7.21. The consultation paper (at paragraph 6.143) proposed that each licence would have a unique reference number (URN). The licence number would include a local authority so that local authorities could issue licence numbers independently.

Consultation proposal:

The consultation paper proposed that a licence number must be displayed on any advert or platform (including on a website or app).

Issue:

Platforms have expressed concern about advertisements remaining live on platforms for unlicensed properties. They are concerned that they would be expected to investigate why such properties were still listed. There was a suggestion that local authorities should have to notify platforms of these decisions in order to facilitate data cleansing.

Stakeholders have questioned how we would ensure that platforms displayed the licence URN, noting that Scottish Government does not have the devolved powers needed to regulate this industry.

Resolution:

No change.

It will be an offence for a host to operate without a licence. The primary duty rests with the host to cease advertising and cease operating. When a licence is refused or revoked, the host must take down listings on platforms.

Enforcement of this could be through a number of channels: local authorities might choose (potentially on a sample basis) to check platforms for listings where they have refused or revoked a licence; neighbours (with any concerns) might check up on any operation that they suspected was unlicensed (and they could check this through the public register); and platforms might also (potentially on a sample basis) check listings against the public register.

Platforms have a reputational (and therefore financial) interest in offering only lawful listings.

A licence URN provides some assurance that a licence had (at least at one point) been obtained. Note that we will be considering security measures to be built into the licence URN so that they are hard to fake and easy to verify.

We will continue discussing with platforms how they can display licence numbers. Market forces should attract guests to licensed properties (indicating that the accommodation is properly regulated and compliant), so it benefits legitimate hosts and platforms to display licence numbers.