Balancing Vacation Rentals – Mark McMurray

Short-term rental hosts may face different regulatory requirements.
Short-term rental hosts may face different regulatory requirements.

Short-term rental platforms have certainly seen significant growth in recent years amid growing demand for private accommodation with around 150 million people currently using Airbnb alone. Meanwhile, in the UK, summer bookings at short-term rental properties have increased 36% this year compared to the same period in 2020.

The growing popularity of short-term rentals has had a significant impact on property markets in popular tourist destinations including Edinburgh and the Isle of Skye, affecting some local communities and their amenities. This has resulted in looming regulation of the sector in Scotland where it will be important to strike the right balance to support a tourism and leisure industry which has been strained since the start of the Covid-19 pandemic.

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The Scottish Government is currently consulting on a draft licensing order for short-term rentals and associated guidance projects. Once approved, this authorization decree will accompany the town planning legislation that entered into force in April 2021 and the associated town planning guidelines published at the end of June.

Planning legislation gives local authorities the power to designate all or part of their areas as a short-term rental control zone, in which the use of a property for short-term rental will require a planning permission. Outside the control zones, a planning permit may still be required but it will continue to be judged on a case-by-case basis.

All short-term rentals in Scotland will also need to be approved, whether or not they require a building permit. The licensing order proposes a number of mandatory conditions, including requirements for fire safety equipment, annual gas safety inspections and maximum occupancy limits. Local authorities will also be able to specify additional discretionary terms and should post standard terms on their websites.

Short-term rental hosts are therefore likely to face different regulatory requirements depending on where their property is located in the country. The Scottish government has, however, proposed a model of additional conditions on various topics in order to reduce inconsistencies across the country.

Short-term leased land owners will have time to familiarize themselves with the requirements before requiring a permit. From October 2022, all existing hosts will have until the end of March 2024 to obtain a license. They can continue to operate in the meantime provided they successfully apply for a license by April 2023.

With the publication of the authorization order, we now have a good idea of ​​how the planning and authorization systems will work. However, it is perhaps the standard conditions published by individual authorities, along with their planning policies for assessing the acceptability or otherwise of short-term rentals, that are of most importance. This detail will follow the legislation, but it is only once we have seen the conditions and policies that we will have a better idea of ​​whether each area has struck the right balance.

As we emerge from the pandemic, cities, regions and nations will compete to be the destination of choice for tourists. Scotland, which had its best year in a decade for night tourism in 2019, is well positioned to capitalize on the future growth of its hotel sector.

Studies also suggest that the popularity of short-term rentals has likely increased due to the pandemic. This is not surprising as they can offer clients their own dedicated hosting, where they don’t have to consider physical distance and other perks like independence and flexibility.

The Scottish Government has recognized that short term rentals can play an important role in supporting additional tourism and the associated economic benefits. Conditions and policies that make it difficult for web hosts to operate, however, could cause Scotland to lose what is likely to become an increasingly competitive market.

On a positive note, the phased introduction of the new regulations will allow hosts to adapt before they come under the regulations and hopefully give the Scottish tourism industry time to rebound before the measures are in effect.

Mark McMurray is a partner and hospitality specialist at CMS

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