The ASSC has highlighted a potential illegality of the draft short-term let licensing legislation, under the Provision of Services Regulations, preserved in UK law by the European Union (Withdrawal) Act 2018.
The ASSC engaged the respected legal firm Burness Paull LLP in Summer 2021 to provide expert comment on the Scottish Government’s short-term let regulatory plans and their arguments are set out from points below (16-19) in this submission.
In our view, the proposed licensing regimes are incompatible with the legal requirements of the Provision of Services Regulations (the “Regulations) 2009 (as amended) and the Provision of Services (Amendment etc.) (EU Exit) Regulations 2018 which preserved the Regulations notwithstanding the UK’s withdrawal from the EU.
The Regulations protect UK businesses and consumer rights by maintaining obligations on UK competent authorities to ensure that their regulation of service activity is proportionate and justified in the public interest. Service activity includes tourism activity which we have interpreted as encompassing self-catering accommodation provision.
Overriding reasons of general interest relevant to short-term accommodation rental services can be: social policy objectives such as ensuring the availability and affordability of local housing; the protection of the urban environment; public security; the protection of consumers; and ensuring tax compliance and effective fiscal supervision.
Justifications for imposing policy and regulatory restrictions on short-term accommodation rental services must be supported by clear evidence that the general interest needs to be protected, and evidence of the link between short-term accommodation rental services and the protection of the general interest.
The Scottish Government has provided no empirical data that there is a direct link between short-term letting and loss of housing stock, thus it cannot be considered to be an overriding reason of general interest.
The Regulations require that an authorisation (licensing) scheme can only be implemented under certain circumstances: to treat issues locally, if these issues are justified by an overriding reason of general interest. In these circumstances, a registration/authorisation (licensing) scheme must be simple, fast, easy to complete, the criteria should be clear, objective and transparent. Once again, we have serious concerns that the draft Order does not meet these requirements.
REQUIREMENTS OF THE REGULATIONS
- Specific requirements of the Regulations which we consider the draft Order to breach include:
- Part 3 of the Regulations Competent authorities are required to provide a clear process for their authorisation scheme and that any scheme meets the requirements within the Regulations. Businesses cannot be prohibited from delivering a services activity due to an economic test, involvement of competing operators or other requirements such as quantitative or territorial restrictions, minimum number of employees etc.
- Competent authorities are obliged not to impose disproportionate or unnecessary requirements on businesses that seek to provide services, unless justified. We have queried above the failure of the Scottish Government to date to provide a sound, evidence-based justification for its approach.
- Conditions for the granting of authorisation: An authorisation scheme must be based on criteria which preclude any competent authority from exercising its power of assessment in an arbitrary manner.
- The criteria must be: (a) justified by an overriding reason relating to the public interest (ORRPI); (b) proportionate to that public interest objective; (c) clear and unambiguous; (d) objective; (e) made public in advance; and(f) transparent and accessible.
- We have set out above our views that the Scottish Government has failed to provide empirical data to support the proposition that these requirements are necessary and justified in the public interest or that they are objective or proportionate.
- Fees charged by a competent authority under an authorisation scheme must be reasonable and proportionate to the cost of the procedures and formalities under the scheme, and must not exceed the cost of those procedures and formalities. See regulation 18(4) of the Regulations.
- Fees should not be used as an economic deterrent to certain activities or to raise funds. If a business believes the fee to be disproportionate, they can contest it with the competent authority concerned.
- We have set out above why we consider that the fees approach proposed is excessive, disproportionate and constitutes a real deterrent to many small businesses in raising funds or simply continuing to operate.