Short term lets leading to changing regulations

As the song says, it’s all about the money as short term letting grows in popularity and landlord numbers rise. With the arrival of online businesses such as Airbnb through to householders renting out their spare room, unsurprisingly there have been unintended consequences – and some bad publicity – due to all this new activity. As a result, the Scottish Government and local authorities are taking steps to better protect residential neighbourhoods and guests. It’s a more complex area than the unsuspecting realise so there’s never been a greater need for professional support for landlords, many of whom are new to the role.

Under current planning laws, landlords may need planning permission if they operate a property for short term lets. The reason given is that it may be deemed to be a material change of use from a residential property to short stay commercial visitor accommodation. Each case is examined on its own merits but it can be difficult to give clear advice. Do all properties being operated as full time short term lets need permission or does it depend on the location and type of property? What if it’s let out for only part of the year? Does it make a difference if it has a common stair? Does a rural location matter? This list is almost endless but the local authority has to consider various factors in making a decision.

The new Planning (Scotland) Act 2019 includes a provision giving local authorities the power to designate all or part of an area as a short term let control area. Planning permission will be required where a property within a control area is to be let out on a short-term basis.

Scottish Ministers have the power to make further regulations, including defining what constitutes providing a short term let and any circumstances in which the designation will not apply. It is hoped that this will now provide the clarity that is required. But we will still have to wait and see because while the Act has been passed, these provisions aren’t yet in force.

Excluded from the Act are tenancies where all or part of a property is the only or principal home of the landlord. It also does seem likely that the regulations will distinguish between the occasional or shared use Airbnb type let for which that platform was originally designed and what some view as the commercial exploitation of online booking service providers.

A wider Scottish Government consultation seeking views on the regulation of short term lets closed on the 22nd July and the responses are likely to inform the approach taken. The Scotsman and the Edinburgh Evening News have reported that Airbnb is backing free online landlord registration and the concept of extending planning requirements for hosts providing more than 140 nights accommodation per year.

Given the current and likely future planning restrictions, it pays to take advice before entering the market. Particularly if counting on the potentially high financial rewards of using a property as a short term let.

There are other things a landlord needs to think about, whether operating on a full time commercial basis or otherwise. Budding short term landlords may find themselves in breach of their mortgage conditions if they let a room without checking out the terms of their mortgage, leaving them at risk of having their lender call up the loan.

Similarly, if they are in breach of title conditions, landlords might face legal action from neighbours keen to see the back of multiple short terms lets in popular city centre locations. It’s also worth checking whether insurance cover is sufficient if there is damage to the property – and is essential that the property is fully health and safety compliant.

Finally, don’t forget that being a landlord of any sort has tax implications that should be planned for carefully.

The bottom line is that while there have been lots of recent reports about the uncontrolled growth of the short term letting sector, particularly in the Capital, there are a lot of factors to consider for the responsible landlord entering the market, particularly with further regulation on the horizon.

Gillian Black

 

 

 

 

 

 

Gillian Black, Property Law Partner, Urquharts

This article appeared in the Scotsman on Monday 16th September

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