Further Scottish short-term let amendments needed to lessen regulatory burdens

In Scotland, a licence is required for what are known as home sharing, home letting and secondary letting. The Government [Scotland] Act 1982 [Licensing and Short-term Lets] [Amendment] Order 2024 will make a number of updates to the existing licensing scheme if passed. The amendments address some restrictive aspects of the previous legislation, aiming to provide a more balanced approach.

Kirsty Gallacher, regulatory law expert at Pinsent Masons, said: “Short-term let owners and the tourism sector more widely have been hoping for some more radical amendments to the restrictive legislation currently in force. It seems that the proposed amendments may not significantly reverse the reduction in the number of properties to let. However, the proposed legislation will be welcome news for some in the industry, for example those specialising in lets for the Edinburgh Festival and other ad hoc events, or those looking to sell a relevant property or business.”

One significant amendment is the introduction of more flexible licensing exceptions for up to six weeks a year. The 2024 Order provides increased scope to apply for temporary exemptions from the requirement to obtain a short-term let licence. Currently, under existing legislation, hosts may only apply for one period of exemption, which must not exceed six weeks in any 12-month period. Under the 2024 Order, hosts may apply for up to three separate periods of exemption per calendar year, with the total exemption period not exceeding six weeks. A temporary licence will permit hosts and other businesses to take bookings and accept guests for a restricted period of time of up to six weeks without having a licence in place. This maybe particularly beneficial in regard to special events such as festivals and major sporting events.

Currently, if a property is sold, the purchaser would be required to apply for a new licence. However, amendments would allow licences to be transferred to a new host. Short-term let licence holders would be able to transfer their licence to third parties via an application to the licencing authority. The idea is to support hosts and operators if they wish to sell by allowing them to market their accommodation as a short-term let with onward bookings in place or if there are other reasons why a licence needs to be transferred – such as that the licence holder has died, and an executor is acting on their behalf.

Prospective short-term let operators would be able to apply for provisional short-term let licences at the construction stage or before accommodation is built. Once the building is completed, the provisional licence would go through a confirmation process. This would be introduced to help ensure greater regulatory planning where the purpose of the new build is identified in advance while aiming to help new entrants seeking to join the sector from being prevented due to uncertainty over whether a licence will be granted or refused after construction.

There are also a number of proposed technical updates included in the order relating to things such as licences for multiple accommodation, guest rooms, foster care arrangements, and the definition of ‘commercial consideration’.

Audrey Ferrie, licensing law expert at Pinsent Masons, said: “Even in situations where some of the restrictions are loosened, the proposed legislation may not go quite far enough. The transfer proposal makes sense, but the proposals are limited in scope. Similarly, the provisional premises licence proposal refers to ‘new builds’ but does not deal with conversions of older properties.”

The Scottish government is also proposing a new tourist levy “which would potentially hinder tourism growth and provide further admin burdens for accommodation providers”, said Gallacher.

The Visitor Levy (Scotland) Bill (42 pages / 2 MB) would allow local authorities to add a charge to overnight accommodation such as hotels, B&Bs and holiday lets. There has been an increasing normalisation of similar taxes in recent years in many well-visited countries and cities around the world.

The fee in Scotland would be a percentage of the cost of overnight accommodation, minus the commission the provider pays to any online booking service and any room ‘add-ons’ such as food and drink.

Among concerns about the proposals raised by affected businesses is that any potential increased charges to guests to cover the cost of the tax could push businesses over the VAT threshold, resulting in additional administrative charges.

However, this form of targeted taxation is generally accepted by tourists. “For these reasons, it seems unlikely that its introduction would have any significant adverse impact on visitor numbers – although individual businesses in local authority areas which choose to implement this will undoubtedly feel an increased administrative burden. On the positive side, the investment from the levy fees could help improve services and infrastructure and bolster tourism,” said Gallacher.