Short term lets - licensing scheme part 2: supplementary guidance for licensing authorities, letting agencies and platforms

3. Licence types and policies

Overarching aim and design principles

3.1. As a general principle, the Scottish Government would like to avoid arbitrary variation across Scotland and an important aim of this Guidance Part 2 is to set out the Scottish Government’s recommended approach to licensing authorities in order to avoid this.

3.2. Licensing authorities should develop the details of their licensing scheme informed by the design principles developed through public consultation, see Annex B.

Two types of licence

3.3. Licensing authorities should issue one of two types of licence for a premises. The licence should be for either:

a) home sharing and home letting; or

b) secondary letting.

3.4. The Licensing Order permits other permutations, such as a single licence for all three types of short-term let. However, home sharing and home letting concern the use of the host or operator’s only or principal home whereas secondary letting makes use of a separate premises.

3.5. Evidence gathered during the two public consultations in 2019 and 2020 and independent research on the impact of short-term lets on communities in 2019^[1] confirmed that secondary letting has much more of an impact in terms of loss of community, noise and anti-social behaviour and reduced availability of housing. Secondary letting is widely believed to increase the cost of housing for locals in hotspot areas.

3.6. There is generally less concern from neighbours around home sharing because the host is present. Indeed, many positive impacts were cited, such as: provision of extra income for owners; better use of housing stock by utilising spare bedrooms; and hosts sharing local knowledge with guests such as recommendations for local businesses.

3.7. Making this distinction will also help with:

• understanding the pattern of short-term let activity;
• differentiating application fees – see chapter 4; and
• applying an overprovision policy to secondary letting – see paragraphs 3.23 and following below.

General policies

3.8. Licensing authorities should develop a set of short-term lets policies specific to their area. Licensing authorities may apply different policies in different parts of their area. Policies should be as simple and straightforward to understand and apply as possible.

3.9. Licensing authorities should ensure that their licensing scheme delivers the Scottish Government’s policy objectives for the licensing of short-term lets and develop detailed policies that are consistent with those objectives.

3.10. As stated in the Guidance Part 1, the aims of the licensing scheme are:

• 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.

3.11. For a licensing scheme to address issues faced by neighbours will require the scheme to be shaped to address local needs and concerns through detailed policies. In some areas, there may be no particular local issues and no need for detailed policies.

3.12. Each licensing authority should have regard to their planning authority’s objectives and policies, including:

• the local development plan;
• other relevant planning policies; and
• any intended or designated control areas.

3.13. Licensing authorities should then develop policies on:

• licence duration and renewal - see paragraphs 3.16 and following below;
• overprovision – see paragraphs 3.23 and following below;
• temporary exemptions – see paragraphs 3.48 and following below;
• temporary licences – see paragraphs 3.58 and following below;
• additional conditions – see chapter 5; and
• compliance and enforcement – see chapter 7;

3.14. These policies will affect the volume of work, the costs and potential chargeable activities and should be determined before setting fees, see chapter 4.

3.15. More information on potential costs is set out in the draft Business and Regulatory Impact Assessment^[2] (Paper 3). However, licensing authorities should bear in mind that their own particular processes and circumstances are likely to move them away from national averages.

Licence duration and renewal policy

3.16. A licence can be granted for a period of up to 3 years initially, after which it needs to be renewed. Licensing authorities have flexibility as to the duration of licences they grant and may grant licences for different time periods to different applicants provided they have clear and transparent criteria for doing so. Licensing authorities should adopt the simplest approach that meets their policy aims.

3.17. The duration applies from the date on which the licence comes into force.

3.18. Licensing authorities may want to incentivise early applications by clarifying that an early application would not result in a licence with an earlier expiry date. For example, applications made in the period October 2022 to March 2023 would, if granted, be granted for such a duration that they would expire on 1 April 2025. I.e. the existing host or operator would get two years from 1 April 2023, even if they applied six months in advance of the deadline.

3.19. The Licensing Order allows licensing authorities to renew licences for such periods as they see fit (there is no time limit)^[3]. However, licensing authorities must set out the circumstances in which they would use the power to set a licence period in excess of three years. Licensing authorities are encouraged to renew licences for a period of three years, unless they have good reasons to do otherwise.

3.20. The Scottish Government’s intention in giving licensing authorities this power is to reduce the administrative burden around renewal for those short-term lets which have demonstrated ongoing compliance with their licence conditions and do not cause issues to neighbours. Longer licence periods would provide hosts and operators with certainty for a longer period, in respect of accepting bookings. However, licensing authorities should bear in mind that longer licence periods could reduce their revenue from renewal application fees and may be more compatible with a subscription model for charging fees.

3.21. The principal policy intention is to ensure that all short-term lets meet basic safety standards (as set out in the mandatory conditions). Therefore, licensing authorities should consider how they will ensure compliance for the duration of the licence. This is potentially more of a challenge where a licence is granted for a longer period of time. Licensing authorities should consider whether and how often they would want to see certain documentation or make visits during the licence period.

3.22. Licensing authorities must specify the duration and expiry date of each licence on the licence itself.

Example licence duration and renewal policy

First licence applications granted for a period of one year.

Renewal applications are normally granted for a period of three years.

However, where any licence conditions have been breached during the previous licence period, the renewal period (if renewed at all) will be for one year.

Overprovision policy statement

3.23. Overprovision is only relevant to secondary letting. Licensing authorities cannot consider overprovision as a factor in determining home sharing and home letting licence applications.

3.24. Licensing authorities have the power to refuse an application for secondary letting where they consider that there would be an overprovision of short-term letting of the same type to which the application relates in that locality^[4]:

(3A) A licensing authority may refuse an application for a short-term let licence for secondary letting if it considers that there is (or, as a result of granting the licence, would be) overprovision of short-term lets in the locality in which the premises is situated, whether of the same type of premises or otherwise.

(3B) It is for the licensing authority to determine the localities within its area for the purpose of sub-paragraph (3A) and in doing so the authority may determine that the whole of the authority’s area is a locality.”

3.25. The prospective test (3A) allows for circumstances in which there are few homes in the locality. For example, in a rural community comprising 12 houses, in which two are already used as short-term lets, it may be that granting a licence to a third house would be regarded as overprovision.

3.26. The type of short-term let here could refer to, for example, lets in a tenement. A licensing authority may take the view that there is an overprovision of lets in tenements in a locality, but grant an application for a licence for a detached home, for example.

3.27. The wording in (3B) makes it clear that it is for the licensing authority to determine the localities. In some cases, these will be informed by, or aligned to, control areas but they might also be informed by other natural or artificial features, such as a group of homes within easy access to a significant amenity. Licensing authorities may determine that the whole of their area is a locality.

3.28. In considering whether there is or would be overprovision in any locality, the licensing authority must have regard to:

a) the number and capacity of licensed short-term lets in the locality, and

b) the need for housing accommodation in the locality and the extent to which short-term let accommodation is impacting the availability of housing, and

c) such other matters as they consider relevant.

3.29. For example, the licensing authority might consider that, given the number of short-term lets operating in an area, it is more important that a particular type of property is directed towards meeting the housing need of permanent residents.

3.30. Decisions to refuse a licence on grounds of overprovision can be appealed.

3.31. Licensing authorities must publish an overprovision policy statement and, from time to time, review it. Their overprovision policy statement must include information regarding:

a) the localities in which the overprovision policies contained within the overprovision policy statement apply; and

b) the policy on overprovision which applies in each locality.

3.32. Licensing authorities may want to set out the matters which they have considered in determining the localities and the policies. Licensing authorities should beware of potential unintended consequences from their overprovision policy, for example causing homes to remain empty for long periods that could otherwise be productively used.

3.33. Licensing authorities must consult such persons as think appropriate on their overprovision policy statement; the breadth and depth of the consultation is likely to depend on the proposed overprovision policy. Licensing authorities should consider linking an overprovision consultation to any public engagement on proposals for control areas by the planning authority, where it might aid public understanding to do so.

3.34. Where a licensing authority does not want to use their powers to refuse any applications on the grounds of overprovision, they can comply with this duty by publishing a statement on their website to the effect that overprovision would not be grounds for refusal in their area.

3.35. A licensing authority can express an overprovision policy for a locality or an area or for their whole area as a formula, provided that care is taken to avoid unintended consequences.

3.36. The data which licensing authorities use to evidence overprovision should be drawn from reliable sources, for example using data from their licence schemes.

Example overprovision policy statements

Example 1

Overprovision is not a ground for refusing a licence application.

Example 2: city formula

In [x] council ward, where approving the application for secondary letting would result in more than 10% of the residential dwellings in the ward being used for this purpose, the application will be refused.

Example 3: rural formula

In any settlement of 10 or more residential dwellings, where approving the application for secondary letting would result in more than 25% of the residential dwellings in the settlement being used for this purpose, the application will be refused.

(In any settlement of fewer than 10 residential dwellings, the application will be considered on its merits.)

(Settlement means any town, village, hamlet or other group of homes which form a recognisable community.)

Links with control areas

3.37. Note that an overprovision policy can be applied to all secondary letting (i.e. including unconventional accommodation) whereas control areas only apply to secondary letting of dwellinghouses.

3.38. A rural licensing authority might not want excessive tourist numbers (more than the amenities can cope with) even when they are not displacing residents from homes. So a rural licensing authority might additionally add a limit on properties (whether dwellinghouses or unconventional accommodation, such as yurts) to their overprovision policy statement (see example 4).

Example overprovision policy statements

Example 4: rural formula for unconventional accommodation

Applications for secondary letting in a settlement will be refused, where approving the application for secondary letting would result in more than the greater of:

a) 100 properties available for secondary letting; or

b) more properties available for secondary letting than residential dwellings in the settlement.

3.39. Control areas can be used to manage secondary letting where overprovision is not the primary concern. For example, control areas might be used to prevent secondary letting of tenement flats because the building is not suitable, rather than because there is an overprovision of short-term lets in the area.

3.40. A control area requires planning permission to be sought whereas an overprovision policy would allow a licensing application to be refused. An overprovision policy in a locality potentially provides a higher level of resolution. For example, secondary letting in Area A might require planning permission (by virtue of being in a control area) but, additionally, licensing applications in respect of main door tenement flats in Locality B within Area A might be refused. A more nuanced approach might be to set a limit on the proportion of main door tenement flats that could be used for short-term lets in Locality B; but the licensing authority would need a clear, fair and transparent means for determining who was given a licence where there were more potential hosts and operators than premises that could be licensed under the policy.

3.41. Licensing authorities should liaise with planning authorities on how licensing and planning applications in respect of the same premises will be treated bearing in mind also that they may be made at different times or planning permission may have already been granted. The planning authority may grant a planning application in a control area because the application is acceptable on planning terms. However, the linked licensing application could be refused on the grounds of overprovision. Where planning permission is refused, the licensing authority can refuse to consider the licensing application^[5].

Relevant matters

3.42. In terms of the data used to establish the number and capacity of licensed short-term lets in the area and the case for overprovision, licensing authorities should first and foremost rely on the public register. However, this will be an incomplete picture in the transitional period to April 2024 and licensing authorities will need to rely on other information. Unlawful unlicensed short-term lets should not factor into any overprovision calculation as these should be pursued and closed down through enforcement activity.

3.43. Licensing authorities could have overprovision policies that place limits on numbers in some way, for example, concentrations (as percentages) of:

• short-term lets within their area;
• short-term lets within individual ward areas;
• short-term lets within individual census output areas; or
• certain types of short-term let (for example short-term lets in flatted dwellings or properties with a communal entrance).

3.44. Licensing authorities could use data from their licensing scheme to introduce limits on the grounds of a concentration of short-term lets in excess of a certain percentage of qualifying residential properties in any one particular Census Output Area (COA).

3.45. Relevant considerations go beyond just numbers and percentages. Other considerations include, for example, the need for main door access accommodation for people with disabilities. So a licensing authority might refuse an application where a significant number of similar homes were already used for short-term lets and people with disabilities were struggling to secure appropriate accommodation.

3.46. However, licensing authorities should also bear in mind that there will be visitors with relevant disabilities for whom the existence of some accessible accommodation is important too. Licensing authorities should consider carefully the balance between existing residents, new residents and visitors with needs for accessible accommodation.

3.47. Applicants can request the reasons for their application being refused from the licensing authority^[6]. They must do this within 21 days of the decision. Licensing authorities must provide the reasons for the decision to refuse the application within 15 days. Where the decision to refuse is on the grounds of overprovision, this should be made clear (as with any other grounds).

Temporary exemptions policy statement

3.48. Licensing authorities can grant temporary exemptions to the requirement to have a licence^[7]. They can do this for:

• a specified occasion; or
• a specified single continuous period not exceeding 6 weeks in any period of 12 months.

3.49. They might do this to accommodate a large influx of visitors over a short period to support sports championship competitions and arts festivals, for example. Hosts and operators must apply for a temporary exemption.

3.50. Licensing authorities must publish a temporary exemptions policy statement and, from time to time, review it. Licensing authorities must consult with such persons as they consider appropriate in preparing and reviewing their temporary exemptions policy statement. Their temporary exemptions policy statement must include information regarding:

a) the fees chargeable for a temporary exemption application; and

b) the time period within which the licensing authority will finally determine the application.

3.51. Temporary exemptions policy statement should also include:

a) the likely conditions attached to an exemption;

b) the grounds for granting or refusing an application for an exemption, including any classes of premises for which an exemption would not be granted; and

c) information about how a decision can be appealed.

3.52. Where a licensing authority does not want to use their powers to grant any exemptions, they can comply with this duty by publishing a statement on their website to the effect that applications for exemptions will not be granted under any circumstances.

Example temporary exemption policy statements

Example 1:

Temporary exemptions will not be granted under any circumstances.

Example 2:

Applications for temporary exemptions will be considered for all premises used for home sharing and home letting during the period from 1 to 31 July inclusive. The purpose of this exemption is to provide additional accommodation in support of the XYZ Event.

You must have a [compliant] smoke alarm system and carbon monoxide detector on your premises.

A flat fee of £[ ] is payable on application. Applications must be made by 1 April and will be determined within 4 weeks of application. Applications will normally be granted other than in cases where there you have had compliance issues in the past (a licence suspended, revoked or application refused) or the premises has failed any mandatory conditions in the past. You can appeal a decision to refuse a temporary exemption.

3.53. Licensing authorities who wish to provide for temporary exemptions should make a dedicated shorter, simpler application form available on their website, alongside their temporary exemptions policy statement.

3.54. Licensing authorities can check and enforce any conditions that are attached to a temporary exemption. Licensing authorities have the right to visit premises and should develop a risk-based approach to prioritising any such visits.

3.55. Licensing authorities can grant or refuse an application for a temporary exemption. If they grant a temporary exemption, they should provide the host or operator with a temporary exemption number (like a licence number), see chapter 6.

Interaction with planning policy

3.56. Planning policies still apply, although these will not commonly affect smaller scale home sharing and home letting^[8]. However, they are relevant for secondary letting, especially within control areas.

3.57. For very large, one-off events (such as the Commonwealth Games, Olympics or COP26), the Scottish Ministers can 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. In such circumstances, temporary exemptions could be granted in respect of secondary letting without any concern about breach of planning control.

Temporary licences policy

3.58. Licensing authorities can issue temporary licences^[9] but they need not do so. A temporary licence can also last for up to six weeks, or longer if the host or operator has also made an application for a licence. If they have applied for a licence, their temporary licence will last until their licence application is finally determined.

3.59. Temporary licences can provide a way for licensing authorities to allow new hosts and operators to start taking guests whilst their licensing application is being considered. Licensing authorities should set out their policy on issuing temporary licences on their website. The policy should set out:

• the licensing authority’s criteria for issuing temporary licences;
• the fees payable; and
• any special conditions which apply.

3.60. Licensing authorities should provide an application form specifically for applications for temporary licences.

3.61. Licensing authorities should issue a temporary licence number to accompany a temporary licence, see chapter 6.

3.62. Hosts and operators must comply with all the mandatory conditions and licensing authorities should consider how to ensure compliance.

3.63. Licensing authorities must notify the Chief Constable and Scottish Fire and Rescue Service in respect of an application for a temporary licence, but are not required to notify neighbours.

3.64. Licensing authorities should be aware that the issuing of a temporary licence to a host or operator who is also making a licence application does not extend the time for the licensing authority to dispose of the licence application.