Is Edinburgh’s short-term let licensing policy really ‘unlawful’? Some thoughts on the impact of the Judicial Review decision of June 2023.

 

In a news article that appeared on 8 June 2023 on the Scotland Legal News website, a headline read, Outer House finds Edinburgh’s short-term let licensing policy unlawful.  The byline goes on to say, “The City of Edinburgh Council’s licensing scheme for short-term lets operators is unlawful, a judge in the Outer House of the Court of Session has ruled.”

The full review and decision by Lord Braid can be found here.

In 49 pages, Lord Braid considered the arguments put to him and arrived at a detailed position that parts of the policy were unlawful in common law, specifically restrictions on the use of tenements (as well as the ‘rebuttal presumption’); the lack of provision of temporary licenses; and requirement to supply floor coverings in terms of STL 9.

The news article indicated that the case centred around the petitioners’ opposition to a presumption against allowing entire flats within the city’s tenements to be used as holiday lets.  Quoted in the article is Rosie Walker, partner and head of litigation at Gilson Gray said, “The court found that the City of Edinburgh Council’s short-term let licensing policy was unlawful at common law and in breach of The Provision of Services Regulations 2009 for a number of different reasons. Most strikingly they found that it was not for the council, as licencing authority, to decide that a licence should not be granted just because a property is in a tenement.”

The Council’s policy can be found here.

The presentation of this review in the news was, perhaps not unsurprisingly, simple and lacking any sense of nuance or depth.  The BBC reported, “A plan to regulate Airbnb-style lets in Edinburgh has been ruled unlawful by a judge less than four months before it was due to come into force.”  The Herald decried, “Edinburgh City Council’s strategy to crack down on Airbnb-style short-term lets has been branded “unlawful” by a judge just four months.”  The Scotsman headline said, “Edinburgh short term lets: Council’s bid to regulate Airbnb-style accommodation ruled ‘unlawful’ by judge” and the byline furthered, “Accommodation providers welcomed the ruling as a ‘victory for law and common sense’”.

The suggestion was that the whole regulatory system had been thrown out on its ear.  This is not the case, and the simplistic reporting camouflaged the very considered position that Lord Braid arrived at, which merits study since it is a new regulatory system where none existed before.

The Judiciary of Scotland website published its assessment of the decision, which is particularly helpful and clear. It considered the Lord Braid had partially upheld a challenge to the City of Edinburgh Council’s Short-Term Let (STL) Licensing Policy only.  In its assessment, it indicated that “more fundamentally, it was not the function of the licensing authority to decide that a licence should not be granted simply because a property was of a particular type or in a particular area.  The regulatory regime that was set up made clear that the planning and licensing regimes were intended to complement each other, and those were decisions for planning.  The Council remained entitled to refuse a particular application on amenity grounds, but not to have a general policy of refusing a licence simply because the property was in a tenement.”

Furthermore, it indicated that “the lack of a regime for temporary licences has also been held to be irrational” as the Council policy of not issuing temporary licences for properties in a tenement applied equally to other forms of STL, for which temporary licences were available.  In addition, the piece noted that Lord Braid has rejected the petitioners’ challenge against annual licensing as it was rational, proportionate and justified by the need for greater inspections.  Similarly, a separate human rights challenge was dismissed as premature.

So, the Judicial Review was much more nuanced than the press reported or the STL industry would have us believe. It found fault in key aspects of the licensing policy, but not all of it.  Furthermore, it is important to recognise that two regulatory systems are in play, and this is considered in the review.

The Scottish Parliament approved a new regulatory system for the licensing of short-term let properties in the Civic Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2022 which comes into force on 1 October 2023, having been delayed for 6 months from the original start date.  The Council’s licensing policy should be read in this context.

Additionally, in the past review of the Planning System, the Scottish Government introduced a new designation – Short-Term Let Control Area – which if designated would require any residential property used as a short-term let operation to apply for a formal Change of Use (planning) application thus clarifying the legal land-use status of STLs.

The City of Edinburgh Council was the first local authority in Scotland to introduce a Control Area, which covers the whole of the local authority area. This was formally approved by the Scottish Government following local consultation.  Following this approval, the Council also consulted recently on changes to its Guidance for Businesses planning guidance note to make clear its position on STL applications.

In considering any planning application for a Change of Use, including retrospective ones, the Council emphasises the existing Local Development Plan Policy Housing 7 – Inappropriate uses in Residential Areas which states, “Developments, including changes of use, which would have a materially detrimental effect on the living conditions of nearby residents, will not be permitted.”  This has been used to reject proposals for STL in common stairs.  Furthermore, this policy assessment has been upheld in many appeal decisions, where the Department of Planning and Environmental Appeals have dismissed appeals (for both planning refusals and enforcement notices) as has the Local Review Body.

So, Lord Braid has found the licensing policy unlawful especially in the restrictive statements regarding tenemental properties and the lack of a temporary license provision.  The review did not consider the planning regime per se, so it remains unchanged.