Short-term lets in Edinburgh: An opportunity for a rethink on the approach to secondary letting

On 8 June 2023, following consideration of a judicial review, there was a significant legal ruling that the City of Edinburgh Council’s Short-Term Lets Licensing Policy is unlawful. This article outlines the review, the outcome of the judgment and the next steps for short-term lets in Edinburgh.

8 September 2023

Circus Lane, Edinburgh

On 8 June 2023, following consideration of a judicial review, there was a significant legal ruling that the City of Edinburgh Council’s Short-Term Lets Licensing Policy is unlawful. Further orders as to the next steps are now awaited. 

What is short-term lets licensing?

We have previously written articles on the new short-term let licensing regime which was legislated for by the Civic Government (Scotland) Act 1982 (Licensing of Short-Term Lets) Order 2021, and which introduced that the licensing of short-term lets would be regulated under the Civic Government (Scotland) Act 1982.

We have also created a Frequently Asked Questions page to provide further information about short-term lets in Scotland.

A Short-Term Let Licence can be issued in respect of home letting (using all or part of a host’s own home while the host is absent), home sharing (using all or part of a host’s own home while the host is present), a combination of the two, or secondary letting (which is, in effect, a person’s second home). It is generally the case that secondary lettings are being scrutinised much more closely by local authorities, as opposed to home letting and home sharing.

Each local authority requires to set out its own policy on its approach to short-term let licensing. It was principally the City of Edinburgh Council’s treatment of secondary letting that the individuals who commenced the judicial review (the Petitioners) sought to challenge.

What was this judicial review about?

The Petitioners were all concerned with the impact that the City of Edinburgh Council Short-Term Lets Licensing Policy, adopted on 29 September 2022, would have on their short-term let businesses. The Petitioners were either owners or property managers/marketers of a number of properties in Edinburgh that would be considered short-term lets. The Petition was concerned with the legality of the licensing policy in a number of respects.

The Petitioners sought a declarator (a court ruling) that the licensing policy was irrational, was unlawful, was disproportionate, and encroached improperly on matters more correctly connecting to planning considerations. The Petitioners sought reduction of the policy. 

A summary of the legal arguments

It is relevant to note that the City of Edinburgh Council had previously designated the whole of its Local Authority area as a Short-Term Let Control Area from 5 September 2022. The effect of that designation is that using an entire dwelling house, that is not also the host’s principal home, as a short-term let would be considered a material change of use that requires planning permission. Within the licensing policy, there was stated to be a “rebuttable presumption” against the grant of a short-term let licence in respect of secondary letting in tenement or shared main door accommodation. 

The central issue at play was what the Petitioners argued was the unlawful and irrational distinction being drawn in the licensing policy between the treatment of home sharing/home letting and secondary letting. In particular:

  1. The introduction in the licensing policy of the "rebuttable presumption" (on the basis that the Regulatory Committee considered that such tenement or shared main door accommodation was unsuitable for short-term secondary letting), 
  2. The lack of a regime for temporary licences to be granted for secondary letting,
  3. A requirement on secondary lets licence holders to ensure that bedrooms, living rooms and hallways in the premises are covered by suitable floor coverings, such as carpet or similar, and
  4. The difference in the length of the licence that might be granted (one year for secondary letting but three years for home sharing/letting), although the Court held that this temporal distinction was not unlawful.

The Petitioners also advanced an argument that was based upon the Provision of Services Regulations 2009, and it was argued the differential treatment between home sharing/letting and secondary letting for the purposes of the short-term lets licensing regime was not justified by a public interest objective and was not proportionate.

The Court’s judgment

The Petitioners’ Challenge was ultimately successful notwithstanding the Council’s arguments in reply (taken very shortly) that (a) the policy was a proportionate response in order to discharge the Council’s obligations under the 1982 Act and 2022 Order, (b) the Council’s concerns that short-term lets may lead to an increase in anti-social behaviour and an erosion of amenities of local neighbourhoods, and (c) that the licensing policy was the fruit of various rounds of consultation.

Lord Braid at the Court of Session concluded that the Council’s policy is unlawful at common law. Specifically in respect of:

  1. The rebuttable presumption against tenement or shared main door accommodation,
  2. The lack of provision for temporary licences,
  3. The requirement to supply floor coverings.

Lord Braid also concluded that the policy breaches The Provision of Services Regulations 2009 Regulations.

Next Steps

The Council will now need to reconsider its approach to secondary short-term lets in light of the Court’s judgment. The timing of this judgment introduces a complication for the Council – existing hosts (that is to say hosts who were using properties for short-term lets prior to 1 October 2022) have until 30 September 2023 to make an application for a short-term let licence. The Council will not be able to determine applications for secondary letting in the manner that was envisaged by its licensing policy. That will be viewed as a positive by secondary letting hosts, but it also introduces uncertainty for applicants who will (in due course) be lodging applications before the September 2023 deadline. Or perhaps this judgment might mean the Regulatory Committee quietly softens its approach towards the licensing of second-home short-term lets. That is particularly so given recent criticisms of the Council’s policy suggesting a more strategic approach is required to the question of sustainable tourism.

Our licensing team, led by Partner and Solicitor Advocate Kevin Clancy, has been advising clients in Edinburgh and throughout Scotland in respect of their applications for short-term lets licences. If you have any questions, please get in touch with our licensing team or your usual Shepherd and Wedderburn contact.