Cullen Property Blog

Short Term Let flats ‘very unlikely’ to gain a licence despite Court Victory

The City of Edinburgh Council’s plan to introduce a hard-line policy on the control and licensing of Short Term Lets (STL) may well have been derailed by the recent Court of Session ruling that it is unlawful, but owners of Edinburgh flats are still ‘very unlikely’ to be awarded a licence, according to the council’s own planning guidance.

So, does victory in the courts materially change the bigger picture for this part of the tourism sector?

The answer to that may well be ‘no’, given the wider considerations involved in gaining a STL licence.

Lord Braid ruled that the council’s STL policy is unlawful at common law.  In particular, the Court found that the council’s approach of a ‘rebuttable presumption’, whereby any flat with a communal entrance would automatically have its licence application rejected, and the policy’s stance on demanding floor coverings and refusing to entertain the issuing of temporary licences, were all unlawful measures and ‘beyond the powers’ of a local authority’s licensing powers.

This certainly has ramifications for other local authorities, and many STL owners will be watching to see what the City of Edinburgh Council does next. However, clues may be found in looking at how other local authorities have approached the Short Term Let registration conundrum without resorting to a hard policy and ending up fighting, and losing, in court.

With hindsight, Edinburgh may consider that it acted hastily and will need to edit its policy very quickly, given that the scheme comes into force in less than four months on 1st October 2023.

Rather than waiting to see what happens next though, Landlords may wish to take a closer look at the other parts of the STL licensing journey.  Specifically, the topic of planning permission.  This is because Edinburgh has been designated a ‘control area’, meaning that a STL owner must obtain planning permission, or a Certificate of Lawfulness (if operating since before 1st October 2012), for change of use prior to applying for an STL licence. This next hurdle may trip up most flat owners.

The Planning Committee at the City of Edinburgh Council met on Wednesday 19th April 2023 to recommend ‘Proposed Changes to Short Term Let Guidance in the Non-Statutory Guidance for Businesses’, and has now confirmed its position in the ‘Guidance for Businesses April 2023’ publication.

Worryingly for owners of STL flats in the city, it states;

‘If the property is accessed off a stair where there are other flats off that stair, it is very unlikely that a change of use will be supported. This is because it has been found that existing residents of flats within stairs are particularly affected by the pattern of activity which often results from permanent STL use where multiple sets of guests stay for short periods of time throughout the year’.

So, whilst the council’s STL policy has been in the legal spotlight and taking all of the attention in recent weeks, there would appear to be a more fundamental obstacle to cause STL landlords further misery.

Each planning application is taken on its own merits and Planning Officers will always look at each one objectively.  But the guidance does seem to indicate that STL owners looking to obtain the required change of use planning permission to support their subsequent STL licence application may be severely disappointed at the response they receive.

The Scottish Government’s deadline for all local authorities to have their respective STL registration schemes in place by the 1st October 2023 still stands. The City of Edinburgh Council could approach Scottish Government for an extension, but having delayed the deadline by six months once already, it’s hard to see why SG would acquiesce to any such request.

It seems more likely that a revised, and lawful, STL Policy will be issued by the council in the next two months.  This would still leave STL owners with time to submit their STL licence applications by the 1st October deadline.  However, given the planning barriers, many owners will need to consider other options if they cannot gain a licence.

For most owners this is likely to be a choice of either selling or switching to long-term letting.  The housing and rental markets are seeing huge demands from buyers and renters, so owners may find these alternatives more palatable than they expected.  And those buyers and renters will likely welcome the increased possibility of securing a new home.

At Cullen Property, we’re seeing an increase in STL owners using our free rental valuation service as they weigh up their options.

As a long-established Registered Letting Agency in Edinburgh, we’re used to seeing the housing and private rented sector markets move and flow over time.  These regulations will undoubtedly cause disruption and changes to the city’s housing stock.  But the ultimate solution to the housing crisis will not be solved by them.  That particular conundrum needs SG and all local authorities to encourage and incentivise the building and supply of more homes for residents across all sectors.  Investors, builders, landlords and lenders all need the long-term confidence and security to actively deliver homes, which isn’t currently there but is desperately needed.