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Hand holding phone with Airbnb on the screen inside a rental

Airbnb – Legal Issues and Reforms

Date: 30/01/2019 | Business & Professional Services, Corporate, Environmental, Planning, Real Estate, Residential Development

The recent rise of online short term lettings agencies has been as impressive as it has controversial. The undisputed leader in this surge is Airbnb. Founded in 2008 to make use of a spare sofa-bed in San Francisco, it has become a huge market disruptor, changing the behaviour of consumers seeking holiday accommodation and redefining the hospitality sector across the world. Airbnb now provides more holiday accommodation than the world’s top 3 hotel chains combined and aims to continue its meteoric rise, forecasting revenues of $8.5bn by 2020.

How have local and national governments in Scotland been keeping pace with this phenomenon? The brief answer is: they haven’t. But that is set to change.

To date, authorities have been faced with a perfect storm of increased tourism and cheap air fares, coupled with huge advancements in internet technology and a slowing property market. In this climate, short term lets have enabled owners to maximise the use of a property without having to sell in a sluggish market. The current lack of regulation makes holiday letting attractive to arms-length investors and operators alike.

Without minimum standards in place, unscrupulous operators can thrive at the expense of legitimate businesses and local communities. They can escape any licensing, fire safety checks, health and safety compliance or trading standards, leaving occupants in unpleasant or even dangerous properties. Neighbours of holiday lets have suffered acutely from this, enduring overburdened local services and anti-social behaviour from less conscientious guests.

In theory, lease terms preventing sub-letting and planning laws requiring consent for a change of use from residential occupation to another use should control these lettings. However, such mechanisms were not designed with the likes of Airbnb in mind and so are no longer fit for purpose. Short term lets are not even properly recorded – we do not know how many properties are used as holiday lets in practice. There are more Airbnb listings in Edinburgh, for example, than properties registered to pay the appropriate business rates. This indicates that many are operating below the regulators’ radars and it is simply not possible to enforce a breach of contract or of planning regulation if the landlord/authority does not know it has occurred.

Even where a breach is suspected, gathering sufficient evidence to take action can be challenging. Under planning regulation, genuinely “ancillary” uses are permitted without additional planning permission but differentiating between a main and ancillary use is difficult. Take a single tenant who travels frequently for work, who may occupy a flat for fewer days per year than holiday makers who use it each weekend – which use prevails in these circumstances?   

Relatively few enforcement cases have been brought by planning authorities to clarify these grey areas and, even then, with mixed results. Council resources are stretched and it might not always make sense to clamp down where short term lets are, in reality, needed to make up shortfalls in tourist accommodation. As some residential communities now reach crisis point and operators increasingly crave clarity on how they can lawfully run their businesses, authorities are taking action.     

New planning legislation in the Scottish Parliament will specifically require consent for changes from traditional residences to short term lettings. It will also align the regulation of flats and whole houses used as holiday lets which, to now, have been treated differently for planning use class purposes. These laws are just one component of wider reforms set to regularise short term lets around Scotland.

In 2018, the City of Edinburgh Council launched a cross-departmental task force to develop solutions to the main complaints against holiday lets, such as on environmental health matters, planning control and community safety. The Council is also considering a register of holiday-let landlords to facilitate monitoring and enforce payment of rates. In London, councils have introduced a grace period, permitting short term lets for 90 days without needing consent. Edinburgh Council is contemplating a similar move.

Authorities must tread carefully to preserve the social and financial benefits of Airbnb type lets while ensuring regulatory reforms achieve their stated objectives. This will be demanding given the varied needs of different areas and the competing policy aims of promoting tourism, preserving residential amenity and protecting heritage assets such as the Edinburgh UNESCO World Heritage Site. Against this background, remedying the persisting confusion about planning laws should be welcomed on all sides – commercial consequences apart, we must remember that planning breaches can ultimately lead to criminal prosecution.   

Please contact Jacqueline Cook should you require further information.

This article first appreared in The Scotsman on 4th February 2019.

The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.

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