The short-term letting industry has seen significant growth in the last 10 years. As a result, short term let properties as defined by Article 3 of the Civic Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2022 (“2022 Order”) are subject to a mandatory licensing scheme in Scotland. Phased introduction means that from 1 January 2025, all hosts and operators must have a short- term let licence in place before taking bookings and receiving guests. Otherwise, hosts and operators will be committing a criminal offence.
Licensing of short-term lets ensures that local authorities have regulatory powers in place to balance fairly the needs and concerns of the local communities against wider tourism interests.
The Civic Government (Scotland) Act 1982 (Licensing and Short-term Lets) (Amendment) Order 2024 (“2024 Amendment Order”) was approved recently by the Scottish Parliament to relax some of the existing restrictive rules on short-term lets in the 2022 Order.
The changes are technical updates and include the following:
1. The introduction of Licence Transfers:
Currently if a property with a short-term let licence is sold, the purchaser is required to apply to the local authority for a new short-term let licence. Each application will be decided on its own circumstances, but this process can be time consuming, administrative with the potential for higher costs in the sale of short-term let properties.
The 2024 Amendment Order has relaxed the existing legislation with a new process to enable the short-term licence holder to apply to the licensing authority to transfer the short term let licence into the name of a third party, including any purchaser of the short-term let property. This is subject to there being no objections from the Chief Constable. This will come as good news for those selling these properties as they can now market the properties as short-term lets, including future bookings, which should facilitate a more straightforward transition as well as a less complex sale transaction! The introduction of transfers for short-term let licences will also be useful in other situations for example, where the licence holder has died, or an executor is acting on their behalf.
2. Provisional Licences for those building Short-Term Let Accommodation:
The 2024 Amendment Order also introduces the ability for prospective hosts and operators, who are building accommodation intended for short-term lets, to apply for a “provisional short-term let licence” at the construction stage.
Once the accommodation is completed, the provisional short-term let licence can be confirmed after the host or operator complies with certain local authority licensing conditions including production of the building standards certificate. Article 2 of the 2024 Amendment Order suggests a provisional licence will be granted for three years, with the ability to extend if the licensing authority considers it appropriate. The idea behind this amendment is to provide reassurance and certainty, for example to lenders, over whether a short-term let licence will be granted at the initial stages. Although prospective hosts and operators will be unable to take bookings until the accommodation is complete and the application for the short-term licence has been confirmed.
Despite this being a welcome introduction in the industry, further clarification is required. The wording in the 2024 Amendment Order provides that an application for a provisional short-term let licence may be made in relation to “any premises despite the fact that, at the time the application is made, the premises are yet to be, or are in the course of being, constructed for use as a short-term let”. Yet the Guidance from the Scottish Government only refers to provisional short-term let licences in respect of new builds. Only once the 2024 Order is operating will it be seen as to whether this amendment extends further to include buildings which are in the process of being converted.
3. Clarification on Temporary Exemptions:
The legislation currently enables a licensing authority to grant a “temporary exemption” from the requirement to obtain a short-term let licence if certain conditions are met. The 2024 Amendment Order clarifies that an applicant without a licence may apply to operate for up to three separate periods of temporary exemption in one calendar year, not exceeding (whether one, two or three periods of exemption are granted) six weeks. Temporary exemptions are particularly useful for those who are looking only to operate for certain one-off events such as sports tournaments, film events and crucially for those in Edinburgh during the Fringe Festival! Any host wishing to operate a short-term let for more than three periods, and/or in excess of 6 weeks in one calendar year would need to apply for a full licence.
4. Relief
The 2024 Amendment Order should help ease some of the restrictions faced by hosts and operators under the existing legislation. Those looking to sell their short-term let property will welcome the introduction of the transfer scheme to streamline the sale process and reduce some of the anxiety throughout! It may take local authorities time to implement the provisions of the 2024 Amendment Order, but the changes should mean some relief and relaxation for the short-term letting industry! Time will tell but it is likely that the short-term licensing regime will continue to evolve.
If you have a Short-term Let or have any questions on Short-term Let Licences, please contact Nina Robertson and Yasmin Myles on 03330 430350 for more information.
