Building standards - building warrant fee model: research project

The purpose of this study is to develop proposals and a model that can be used to deliver a funding model that is flexible and can be adjusted to allow changes to building warrant fees in Scotland.

8. Devolved Fees

8.1 Introduction

8.1.1 One of the aims of the research is to consider options for a fully and partially devolved fees system for building standards in Scotland. For Houses of Multiple Occupation (HMO) and short-term let (STL) licenses in Scotland, local authorities are able to set their own fees to recover their costs for providing and enforcing the schemes. Building control departments in England and Wales are also able to set their own fees on a full cost recovery basis.

8.1.2 This section provides a brief summary of the two licensing schemes and the English approach to building control. The section concludes with a brief description of three options for devolved fees.

8.2 Overview of Other Approaches to Licensing and Fee Setting

Short Term Lets Licensing Scheme

8.2.1 The Scottish Government guidance on STL licensing[24] states that licensing authorities should develop STL policies specific to their area and that they may apply different policies in different parts of their area.

8.2.2 The aims of the licensing scheme are to:

  • Ensure short-term lets are safe and address issues faced by neighbours.
  • Facilitate licensing authorities in knowing and understanding what is happening in their area.
  • Assist with handling complaints effectively.

8.2.3 It is recognised that the licensing scheme will impose new costs upon local authorities and these costs can be recovered through fees. The aggregate revenue generated from fees must not exceed the authority’s aggregate costs of establishing and running the licensing scheme. The fees should be reviewed from time to time to ensure that revenue remains in line with costs.

  • Establishment costs include:
    • setting up the scheme.
    • training staff to operate the scheme.
  • Running costs include:
    • processing applications and renewals.
    • issuing licences.
    • undertaking site visits.
    • handling complaints.
    • monitoring and enforcement.

8.2.4 The Scottish Government strongly recommends against setting a uniform flat fee for licensing applications. The guidance recognises that whilst it would be administratively more straightforward for licensing authorities, it would disproportionately benefit hosts/operators of larger premises whilst adversely affecting home sharing and smaller self-catering operators. It should be noted that revenue from fines relating to licensing offences do not go to the licensing authority.

HMO Licensing Scheme

8.2.5 The Scottish Government guidance on the licensing of HMOs[25] notes that the purpose of HMO licensing is to achieve and maintain high standards of service in this part of the private rented sector. The importance of HMO owners in providing flexible and affordable housing to occupiers is recognised and the licensing scheme aims to ensure that occupiers can access accommodation that is safe and of a reasonable standard.

8.2.6 The guidance recognises that local authorities should exercise flexibility and discretion in their assessment of applications from different types of providers to balance protection of occupiers with reasonable compliance costs for HMO owners.

8.2.7 A local authority can charge fees for an application for an HMO licence, the issue of a certified copy of an HMO licence or the issue of a certified copy of an entry in the authority’s HMO register. It cannot charge fees for inspections or variations to a licence, although the costs of visits to premises are included in the application fee. The fees must be reasonable and proportionate to, but not exceed the costs of all the procedures required to carry out the function of the licensing regime. Furthermore, income received by the local authority from HMO licence fees should not be used to subsidise any other public service or vice versa. The fee structure should be subject to periodic review at the discretion of the local authority.

Local Authority Building Control in England and Wales

8.2.8 The Building (Local Authority Charges) Regulations 2010 build on the principle of devolving charge setting to local authorities in order to provide more flexibility, accuracy, fairness and transparency in the charging regime and also to improve the environment within which local authorities and approved inspectors compete.

8.2.9 The overarching principles of the local authority building control charging system are full cost recovery and users to only pay for the service they receive. It is therefore important to isolate the costs attributable to the building regulations chargeable service from the other building control functions.

8.2.10 CIPFA guidance on local authority building control accounting[26] notes that the prescribed building regulation functions and advice for which charges should be levied are:

  • Checking full plans and applications.
  • Inspecting work associated with full plans applications.
  • Checking/inspecting work associated with building notices.
  • Checking/inspecting work reverting to local authority control.
  • Checking/inspecting work associated with regularisation applications.
  • Providing advice in respect of the chargeable functions listed above, before these functions are carried out i.e. before an application or notice is received (note: the first hour is non-chargeable).

Comparison of the Schemes

8.2.11 Table 1 (Annex A) provides a comparison of the three charging schemes including a summary of the activities which can attract a charge, possible parameters for setting fees and the costs which can be included in the fee charged. The number of HMO and STL licenses by authority are shown in Table 2 (Annex A) and from these listings, seven authorities were selected for further analysis and consultation.

8.2.12 Tables 8.1 and 8.2 provide a summary of the key characteristics of the STL and HMO schemes by authority. The main points to highlight include:

  • The variation in the number of charging bands for both schemes. For example, Glasgow has 2 occupancy bands for secondary STLs (4 and under, 5 or more) while Edinburgh has 10. For HMOs, Glasgow has eight while Edinburgh has 37.
  • For STLs, most authorities in Table 8.1 have different fees for home sharing and secondary letting, but not all.
  • Some authorities also have different fees for new licenses compared to renewals, but not all for both STL and HMO applications.
  • There is considerable variation in the fees charged. For example, a STL for a secondary letting application for a four person property in Glasgow is £250 for 3 years compared to £1,089 for one year in Edinburgh. For a HMO application for 3 people in Aberdeen, the fee is £655 for three years while it is £1,981 in Glasgow.
Table 8.1: Summary of STL License Information for Selected Authorities
Aberdeen D&G Edinburgh Fife Glasgow Highland Stirling
Different Licenses fees for home sharing and secondary letting No Yes Yes No Yes Yes Yes
Number of bands for capacity

6 (occ. based)

(1-2, 3-4, 5-6, 7-8, 9-12, 13+)

3 (bedroom based)

(1-3, 4-6, 7+)

6 (occ. based)

(1-3, 4-5, 6-10, 11-15,16-20, 21+)

10 (occ. based)

(1-2, 3-4, 5-6, 7-8, 9-10, 11-12, 13-14, 15-16, 17-18, 19-20)

2 (occ. based)

(4 or less, 5 or more)

4 (occ. based)

(1-2, 3-6, 7-9, 10+)

Excludes children <2 years

2 (occ. based)

(4 or less, 5 or more)

Different fees for initial application and renewals Not specified Yes No No Yes No Yes
Other licenses e.g. temporary licenses and exemptions No No

Temporary license and temporary exemption - 3 occ. bands

Property with HMO in place

Temporary license and exemption – 10 occ. bands No temporary, possible temporary exemption for national events Temporary license – 4 occ. bands Temporary license or exemption – 2 occ. bands
Other fees Not specified Not specified Not specified

Charge for visit from failure to comply/complaint


License variation

License variation


License variation

Charge for visit from failure to comply/complaint

Not specified
Secondary letting app for 4 person property £630 (3 years) £302.81 (3 years) £1,089 (1 year) £292 (3years) £250 (3 years) £470 (3 years) £250 (3 years)
Secondary renewal for 4 person property Assume as new application £208.4 (3 years) As new application As new application £200 (3 years) As new application £200 (3 years)
Secondary letting app for 8 person property £1,120 £385.85 (3 years) £2,481 (1 year) £348 (3 years) £400 (3 years) £540 (3 years) £400 (3 years)
Secondary renewal for 8 person property Assume as new application £277.86 (3 years) As new application As new Application £350 (3 years) As new application £350 (3 years)
Table 8.2: Summary of HMO License Information for Selected Authorities
Aberdeen D&G Edinburgh Fife Glasgow Highland Stirling
Cost split into different parts – application & inspections during license Yes No No No No No No
Number of bands for capacity (tenants)


(3-5, 6-10, 11-20, 21-50, 51-100, 101-200, 201+)


(3-5, 6-10, 11+)


(individual increments of 1, 10, 50 depending on size)

10 (occ. based)

(3-5, 6-10, 11-20, 21-50, 51-100, 101-200…401-500, 500+)


(up to 10, 11,100, 101-200,…601-700)


(10 or less, 11+)


(up to 5, 10, 20, 50, 100, 100+)

Different fees for initial application and renewals Yes Yes No No Yes No No
Reductions Educational institutions if owned/managed by registered charity. 10% if institution, charity, public sector for 3-10 people Block discount (65%)
Other fees Not specified Not specified Copy of license

Copy of license,

Pre-app inspection,

Missed appointment

Footprint fees

Copy of license

Variation of fees – alterations and change in capacity

Copy of license

Change of circumstance, Footprint fee

Late app.
App. for 3 people

£655 (3 years)

£490 (app)

£165 (inspections)

£1,044.75 (3 years) £653 (1 year) £1,628 (3 years) £1,981 (3 years) £801 (3 years) £711 (2 years)
Renewal for 3 people

£528 (years)

£396 (app)

£132 (inspections)

£708.75 (3 years) As new application (can be 1 or 3 years) As new application £991 (3 years) As new application £711 (2 years)
App for 11 people


£1,617 (app)

£165 (inspect.)

£1,312.50 (3 years) £2,759 (1 or 3 year) £2,288 (3 years) £4,197 (3 years) £1,066 (3 years) £828 (2 years)
Renewal for 11 people


£1,056 (apps)

£132 (inspect.)

£945 (3 years) As new application As new Application £2,099 (3 years) As new application £828 (2 years)

Consultations with Scottish Local Authorities

8.2.13 Two[27] consultations were undertaken with licensing teams to understand the key issues around local fee setting for HMO and STL licenses.

8.2.14 Establishing the cost base is a key issue in setting the license fees which were established on a cost recovery basis. For the STL scheme, estimates have had to be made on the expected number of applications and the likely time to process. Both consultees were able to draw on their experience of other (e.g. HMO, landlord registration) licensing processing times.

8.2.15 Both consultees also highlighted the substantial upfront costs which have been incurred (e.g. software, equipment, development of application form, training etc.) and which have to be recovered over a three period.

8.2.16 As discussed in Section 6.2 there are two very different local authority models relating to the treatment of central support costs and these two approaches were reflected in the licensing consultations. One consultee made an allowance for support services within the fee while the other aimed to only recover the direct costs of administering the schemes.

8.2.17 The structure of the STL license fees in each area were broadly based on Scottish Government guidance (i.e. higher fee rates for larger properties) although it was acknowledged that smaller property applications can sometimes be quite time consuming due to the quality of the application. Local decisions were made on optional conditions to reflect local policy e.g. temporary licenses etc.

8.2.18 Both consultees highlighted the need to review the fee rates annually to ensure fee income is covering costs. The costs associated with these reviews should not be underestimated and this is a cost which cannot be recovered through fees. Any change to the fees as a result of a review would have to go to committee for approval and the cost of preparing these papers and committee time can be expensive. Hence, the costs of monitoring and review are one of the disadvantages of local fee setting.

8.2.19 A further disadvantage is having different fee rates in every authority for the same license which adds to complaints as applicants compare fee rates across authorities.

8.2.20 One of the advantages of local fee setting was the ability to justify the cost of providing the service which reflected the needs of your specific area. For example, the cost base will vary across authorities depending on geography and local circumstances.

8.3 Options for Devolved Fee Setting

8.3.1 At present the structure of fees for building warrants is set centrally by the Scottish Government and has been since 2005. The actual fee paid is determined locally and depends on the value of work and other factors such as certification discounts and the surcharge for late applications. In England and Wales building regulations fees are set locally within a national legislative framework and there is competition for the delivery of the service. There has been interest expressed by COSLA[28] on the introduction of powers for local devolved fee setting for several local authority services including, potentially, building warrant fees.

8.3.2 The research has reviewed the advantages and disadvantages of different options for moving in full or part to a devolved fee approach. The following three main options have been considered:

  • Option 1: full devolution of fees.
  • Option 2: partial devolution of fees with national guidance.
  • Option 3: partial devolution of fees with deviation from a national fee structure.

Option 1: Full Devolution of Fees

8.3.3 Under this option, each local authority would be able to set their own fees for all types and all aspects of verification work. However, this devolution would be within the overall framework for public service fee setting and so would have to operate within these parameters. It is likely that the fees charged would have to adhere to the general principles for setting fees as set out in the Scottish Public Finance Manual[29] which states that “the standard approach to setting charges for public services is full cost recovery” (para 2). This manual is “aimed primarily at the constituent parts of the Scottish Administration” and its executive agencies. However, its principles would, it is expected, be applied to a devolved fee setting system for building warrants and verification.

8.3.4 The Scottish Government guidance[30] on the recently introduced licensing scheme for short term lets makes it clear that:

  • Para 3.1. “Licensing authorities are responsible for establishing and running the short-term let licensing scheme in their area and can recover the costs of establishing and running the scheme through fees” (our emphasis added)
  • Para 3.2. “Licensing authorities must determine their own fees and fee structures to recover establishment and running costs specific to their area. Licensing authorities must review their fees from time to time to ensure that revenue from fees remains in line with the running costs of the licensing scheme”.

8.3.5 The guidance then sets out some further criteria to be taken into account in setting fees, but allows for very considerable flexibility in the specific approaches that can be followed.

8.3.6 The Scottish Public Finance Manual sets out the features to be taken into account in measuring the annual cost of a service. This includes amongst others:

  • Total employment costs of those providing the service, including training.
  • Accommodation, including capital charges for freehold properties.
  • Office equipment, including IT systems.
  • Overheads (e.g. shares of payroll, audit, directorate management costs, legal services etc.).
  • Fees to sub-contractors.

8.3.7 The Public Finance Manual also states that costs of enforcement (i.e. legal duties) should not be included in establishing the annual cost of a service and setting fees. This is also noted in the STL guidance; “fee charged for processing the application should not include enforcement costs”. However, the guidance does state that the licensing authority “may charge fees to cover enforcement costs once the application is granted (normally through monitoring and/or renewal fees)”.

8.3.8 The move to a full devolved fee setting regime would require some form of Scottish Government advice and guidance (as per the short term let licensing fees). There would be some choices here:

  • Option 1A: very short and high-level guidance setting out:

    a) The scope of local authority powers to set fees (i.e. what services it covered and did not cover).

    b) The principles of full cost recovery and the elements to be covered and any exclusions (e.g. enforcement).

    c) Requirement to publish fees.

    [This would be akin to the England and Wales model]

  • Option 1B: more detailed guidance covering the elements of Option 1A but also setting out, if Scottish Government so decided, more prescription/parameters on the actual approach to setting fees at a micro level (for instance a requirement to have a minimum fee, surcharges for late applications etc.).

8.3.9 To move to the new system it is expected that, as a well as Scottish Government guidance, further guidance from LABSS would be required to help, in a practical way, authorities to set fees. Unless precluded from so doing, authorities could also choose to base their fees on the value of work, type of work, area of building etc. as in England and Wales.

8.3.10 Inevitably, under this system, fees for the same type and quantity/size/value of verification work would vary across authorities.

8.3.11 Tables 8.1 and 8.2 above illustrate the variation in fees that can arise when there is full devolution and the complexities of establishing the full cost of the service should not be underestimated. This was highlight during the consultations with finance department colleagues in the analysis of overheads in building standards (Section 6.2).

Option 2: Partial Devolution through National Guidance

8.3.12 The second option would, in effect, be an extension of Option 1B. It would offer detailed national guidance on a standard fee structure either through BSD or LABSS. This would be a full fee structure, but it would only be guidance and not set in legislation. Each authority could follow the guidance or follow their own approach using a full cost recovery approach. It would be for local discretion to choose the approach.

8.3.13 In England and Wales, LABC produced a model set of charges which have been adopted by many authorities (with subsequent updates). It is expected that authorities would broadly follow the national fee structure but they would have the option to make any local variations they feel are necessary.

8.3.14 It is possible that when introduced to start with authorities would choose to adopt the national guidance, but over time would develop more localised bespoke arrangements either for individual authorities, or potentially groups of authorities (especially where there are shared services).

8.3.15 One issue with this approach is that there could be an inconsistency between expecting full cost recovery and the use of national fees rates which would not reflect difference in local delivery costs (in respect of local employment costs and the geography of areas).

Option 3: Partial Devolution through Deviation from National Fee Structure

8.3.16 The third option would have a national fee structure that is formally legislated as at present but there would be specific allowances (“derogations”) for authorities to deviate from certain aspects of the national charges (but not all of them). For example:

  • There could be a local uplift (up to a maximum level) on some fees to reflect different local costs of delivery. The uplift might be purely for local discretion, or it might require approval from BSD.
  • There could be the opportunity to pay for local ‘add-ons’ such as specific fees for extra services provided by the authority (e.g. pre-application meetings or advice).

8.4 Advantages and Disadvantages of Devolved Options

8.4.1 The advantages and disadvantages of these options compared to no devolution are set out below in Table 8.3 in respect of: complexity; cost of application and development; clarity for users; ability to reflect local circumstances. The key points are:

  • Complexity: Option 2 would be the most complex as there would be a mix of a national and local systems in operation. Under Options 1A, 2 and 3 BSD would still need to provide guidance and for Options 2 and 3 set fees each year. The complexity of establishing the full cost of the verification service should not be underestimated.
  • Cost of application and development of system: All Options where complete local fee structures are introduced would lead to costs for authorities in terms of designing their local fee structure and setting fee levels. The advantage of Option 2 would be that authorities could choose to take the “off the shelf” model if they so wished. There would also be monitoring and review costs to consider with local fee structures. All options would require legislation to be amended and created to enable devolved fees.
  • Clarity for users: Any system where there are different fees in different local areas has the potential to create some complexity for those users who operate across different authorities (i.e. some non-domestic users or volume house builders). The cost of obtaining a building warrant for an identical project could and would vary from area to area. However, such a system has operated in England and Wales with, so far as we are aware, limited challenges for users operating in multiple local authorities. It is not known the extent to which users in England and Wales operating across authorities may use Approved Inspectors. Option 3 and to start with Option 2 would have least variations in fees.
  • Ability to reflect local circumstances: All devolved systems offer this to some and differing degrees (Option 3 performs least well in that regard). There could also be advantages if fee income was “ring fenced” to support the building standards service.
Table 8.3: Summary of Advantages and Disadvantages of Devolved Fee Options


Option 1: Full Devolution of Fees

Option 2: Partial Devolution through National Guidance

Option 3: Partial Devolution through Deviation from National Fee Structure

1A: short, high-level guidance

1B: more detailed guidance

Complexity - National

Lowest level of complexity at national level.

Slightly more complexity than 1A.

Largely as current system to initially; as more authorities choose their own local fee setting national guidance could become less and less necessary with the two track system complicated.

Largely as current system, the local derogations adding further complexity.

Complexity - Local

Degree of complexity at a local level depends on the fee setting regime chosen in each area (so could vary from area to area).

See above.

Simple to apply; the derogations would need to be set out clearly in advance.

Cost of introducing and delivering fees

Authorities would need to set up their own systems for designing then estimating fee levels each year involving finance teams and BS teams.

Would be extra costs for authorities who chose to introduce their own local system or parts of system.

Similar as present.

Clarity for users

Some potential for confusion for users who operate across several authorities.

To start with as present but over time, some potential for confusion for users who operate across several authorities.

Largely a national regime with some local tweaks, so easy to understand.

Ability to reflect local circumstances

Highest, full autonomy for authorities to decide how to set fees (within broad parameters).

Medium, autonomy and flexibility may be constrained by guidance.

If authorities choose so to do, they can introduce their localised fee regime.

Constrained except for specific elements; so limited scope to reflect local circumstances.

Ability for BSD to determine nature of fee regime

Lowest, very limited.

The guidance would provide more parameters on what authorities could or could not do, so some scope to influence behaviour.

For authorities still using national guidance/system.

Similar to current system, BSD can determine fees.


Provides authorities the flexibility to determine their own system for charging so performs well in respect of devolution. There would be some extra costs to authorities in introducing and manging the system. Would lead to different fees for same project in different parts of Scotland.

Has some benefits as an interim/transition solution. However, likely to lead to a version of Option 1A or 1B in the long run. There would be some costs and extra complexity from a two track system.

Very similar to a national system, the main benefit is some flexibility for areas to reflect specific extra local costs or introduce small chargers to improve the system. However, does not really deliver any devolution to authorities.

8.5 Conclusions

8.5.1 The main conclusions to be drawn on the introduction of a devolved fees system are as follows:

  • There are no specific impediments or factors that would make the introduction of a devolved system inherently difficult. A devolved system has operated in England and Wales for many years and the challenges there relate not to the devolved nature of the system per se but the competition element. It has been beyond the scope of this research to consider the introduction of competition into building warrants in Scotland.
  • Scottish Government would have to decide how far it needed to set parameters around the scope for authorities to set fees as they wished (within an overall cost recovery framework). This would involve new legislation and changes as fees are currently statutory.
  • There would need to be some form of policing or oversight of fee setting by Scottish Government to ensure that the overall level of fees raised were reasonable compared to the cost of provision and guidance and/or legislation in this regard.
  • Having devolved fees might make it more complicated to fund central services and features such as the Hub (although in principle this could be based on warrants issued or fee income by authority).
  • A devolved system (in full or part) would introduce variations in fee levels and approaches across Scotland which might cause some mild complication for those users who operate across several authorities. However, this does not feature as a significant concern in England and Wales.



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