The Scottish Government’s More Homes Division has suggested that “the majority of the fees published so far by local authorities … fall within the estimate of £218 to £436 for a three-year licence predicted in the Scottish Government’s Business Regulatory Impact Assessment, and follow our guidance to tailor according to licence type and accommodation size”.
The ASSC believe that there is strong evidence to suggest that fees are not being set on a cost recovery basis, with large variations seen throughout Scotland.
As Table A below shows, the average fees for both homesharing/letting and secondary letting for those accommodating more than 4 occupants averages above £1,000. Such costs – coupled with compliance with existing regulation as well as energy price increases – may force some operators out of business.
However you look at it, it is clear that they are all far higher than Landlords Register Fees, of which there are three: Principal Fee: £68; Property Fee: £16 (per let property); and Late Application Fee: £137.
Additional costs will have to be passed onto guests in a price sensitive market. If this becomes too prohibitive, visitors simply won’t choose to holiday using self-catering in Scotland, thereby damaging a key component part of our tourism industry.
- The secondary letting figures for City of Edinburgh, Dundee City Council and Perth & Kinross Council are particularly stark when compared to other local authorities for equivalent sized properties.
- Edinburgh: 11-15 occupants is £3,872 for a one-year license and for 16-20 occupants, it is £5,869;
- Dundee: £3,100 for 12-20 occupants on a three-year license; and
- Perth and Kinross: £1,600 for 11+ occupants.
On 23rd April 2023, the ASSC submitted an FOI to each local authority in respect of the following:
- How many short-term let licence applications have you received in total and then broken down by: (a) home sharing; (b) home letting; and (c) secondary letting?
- How many short-term let licences have been (a) granted (b) granted with conditions; and (c) rejected?
- How many licence applications did you anticipate in order to reach your fees in total and then broken down by: (a) home sharing; (b) home letting; and (c) secondary letting?
- What short-term let licensing fees have been collected so far?
- How many members of staff have been employed to administer the scheme broken down by: (a) full time; (b) part time.
Alarmingly, from first responses at 15th May 2023, numbers of applications are extremely low:
- Argyll & Bute – 347 received / 18 granted
- Dumfries & Galloway (provided a financial incentive to apply before December 2022) – 492 / 295 granted
- Orkney – 71 / 17 granted / 2 withdrawn
- Fife – 378
- East Ayrshire – 10 (all secondary lets) / 4 granted
- Highland – 1,508 / 655 granted
More pertinently, we note that Clackmannanshire, Dumfries & Galloway, Dundee City, Fife and North Lanarkshire Councils have NOT set their fees on a cost recovery basis as they do not hold information on how many licence applications were anticipated. Highland, East Lothian, Mid Lothian and Orkney are basing fees entirely on estimates.
More pertinently, we note that neither Dumfries and Galloway or Clackmannanshire Councils have set their fees on a cost recovery basis as they do not hold information on how many licence applications were anticipated. This fundamentally goes against the legislation and is therefore unlawful.
The same certification is required irrespective of whether the premises sleeps 2 or 32. In theory, therefore, it should take the same time to assess and consider the application. It is therefore absurd to suggest that a larger property should pay more on a cost recovery basis.
It becomes clear that fees have been set according to (a) HMO Fees and (b) Scotland Act 2005. This is entirely inappropriate.
Fees cannot be set in the same way as HMO licences are as Licensing Authorities have no idea about the number of licences that will be required. Furthermore, HMO licences are based on the number of tenants. If you accommodate more tenants, entering into what is essentially a separate PRT arrangement with each, a landlord is able to accrue more rent per capita. STL properties cannot be assessed under the same test, given the entirely different business model. An STL property is provided in its entirety, and the number of guests is irrelevant. The rate charged to a guest (the lead guest) is not based on number of guests. It does not take longer to process a larger property and the revenue generated is not dependent on number of guests.
The Scottish Government has directed Licensing Authorities to base fees on occupant capacity. Occupant capacity in HMOs and STLs are not equivalent and cannot be calculated similarly. This is a flawed and inappropriate model to apply to STL Licensing.
Similarly, when liquor licensing was moved from the 1976 Act to the 2005 Act, Licensing Authorities knew how many licences generally would be applied for. The transitional period assisted in an understanding of appropriate costs. On this basis, the costs were set on a cost recovery basis and could be self-funded. Retrospectively, Licensing Authorities could assess if fees were incorrect and re-calculate accordingly. In the case of SLT Licensing, there is no precedent and no touchstone on which to base fees on a cost recovery basis. On this basis, it is impossible to make the scheme self-funding.
We understand that in a letter sent to Licensing Authorities on 27th March 2023, the former Cabinet Secretary for Housing Shona Robison MSP encouraged ‘token fees’ for homesharing. In their response, Argyll & Bute Council have questioned what the definition of a ‘token fee’ is. It is their opinion that this does not align with the requirement for cost recovery – or would the cost of administering home sharing have to be absorbed by secondary letting? If so, this amounts to discriminatory treatment of one type of licence over another and amounts to a lack of natural justice.
If a Licensing Authority has to re-calculate fees on the basis of retrospective applications / revenue generated, it may result in increased fees. This is not (a) equitable, (b) a level playing field, (c) natural justice or (d) fair justice.
SOLUTION
Fees for short-term let licensing should not be set according to HMO fees or the 2005 Scotland Act, nor should the Scottish Government encourage ‘token’ fees for homesharing.
If Licensing Authorities have incorrectly set fees, they will need to be refunded, as is the case in Scotland Act 2005. They must then be recalculated having been correctly modelled.
Fees should sit within the estimates provided by the Scottish Government’s BRIA and a set fee might be a means to achieve this.
Note
The ASSC notes that the HMO regime is also relevant because those licences were originally also granted under Part 1 and Schedule 1 to the 1982 Act. From 31 August 2011, the terms of the 1982 Act licensing scheme as applied to HMOs is said in the Explanatory Notes to have been re-enacted in primary legislation in the Housing (Scotland) Act 2006.