Short term lets - licensing scheme part 2: supplementary guidance for licensing authorities, letting agencies and platforms

3. Setting licences

(a) Balancing costs and revenues

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.^[7]

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]

3.3. Licensing authorities are experienced in running other forms of licensing schemes and keeping costs down. In line with this, the Scottish Government encourages licensing authorities to have regard to minimising costs through:

• economies of scale;
• integrating service delivery with other housing and licensing functions;
• using online and digital verification where possible, for example through photo and video evidence instead of a visit; and
• taking a proportionate, risk-based approach to checks and verification, for example in considering whether, when and how often visits to premises are needed, especially in more remote and rural areas where the costs of such visits could be higher.

(b) Chargeable activities

3.4. Licensing authorities may charge fees for the following:

• licence applications;
• licence renewal applications;
• temporary exemption applications;
• issuing of duplicate licences;
• their consideration of a material change of circumstances or in premises and their disposal of the matter;
• issuing a certified true copy of any entry on the public register; and
• visits to premises where the visit is necessary because of a failure of the host or operator (see paragraph 4.14).

3.5. Licensing authorities may decide to split costs into component parts, publishing a cost for a licence application fee and a separate cost where an inspection is required (for example, if a concern is flagged by Police Scotland or the Scottish Fire and Rescue Service). This could also be combined with a policy, for example, which set out that the need for routine inspections might be minimised if the documents submitted as part of an application (such as floor plans, photos, videos, certificates etc.) were sufficient to:

• verify compliance with mandatory licence conditions; and/or
• determine the maximum occupancy number.

3.6. This approach may help to ensure applicants provide sufficient evidence when submitting the application. Where licensing authorities choose to adopt such an approach, we would encourage them to provide clear guidance to applicants on the information/format of information they'd require in order to grant an application without a physical inspection of the premises. An example fee structure based on this approach is set out below:

3.7. Licensing authorities may decide to allow hosts or operators to pay an annual fee in place of the application fee, should they wish to do so.^[9]

3.8. Licensing authorities must not charge neighbours or others for handling complaints or objections.

3.9. Licensing authorities may charge for applications to vary the terms of a licence.

3.10. Revenue from fines in respect of licensing offences (see chapter 6) do not go to the licensing authority.

Publicising the fees

3.11. Licensing authorities are expected to publish details of fees in respect of their licensing scheme, and should give reasonable notice of any changes.

Fees for visits to premises

3.12. Licensing authorities may charge a fee to a host or operator for a visit to their premises, where the visit results from their failure to comply with licence conditions or a complaint relating to the premises which is not frivolous or vexatious.

3.13. A fee may be charged for an inspection following a complaint, where it is found that there are compliance issues, whether or not those are the issues that were the subject of the complaint.

3.14. Where a fee is charged for such a visit, the licensing authority must produce a report of its findings to the host or operator within 28 days of the inspection.^[10] Where a report is not provided within 28 days of the inspection, the licensing authority must refund the fee charged to the licence holder.

Refunds and refused applications

3.15. In general, fees are not refundable. The Scottish Government encourages licensing authorities to publish their policy on refunds so that hosts and operators are clear on the position before they make an application.

3.16. Whether or not a licensing application is granted, the licensing authority will incur significant costs in processing the application. Licensing authorities must ensure, prior to an application being granted, the applicant is only charged the costs relating to the processing of their application. If the application is refused, the fee charged for the processing of the application itself need not be refunded.

3.17. Please be aware that the fee charged for processing the application should not include enforcement costs. This was determined at the Supreme Court in the case of R v. Westminster City Council (2017)⁵. The licensing authority may charge fees to cover enforcement costs once the application is granted (normally through monitoring and/or renewal fees).

3.18. Where a licensing authority refuses to consider an application because the host or operator needs to obtain planning permission (see chapter 6), the licensing authority does not need to refund the fee paid. However, the licensing authority must not charge a further fee in respect of a resubmitted licensing application made within 28 days of planning permission being granted.

(c) Parameters for setting fees

3.19. Licensing authorities may take account of the following criteria in determining the amount of fees to charge:

• the size of the premises;
• the number of rooms at the premises;
• the number of guests who can reside at the premises;
• the type of short-term let;
• the duration of the period for which the premises are made available for use as a short-term let (but note that licensing authorities cannot set limits on nights on licences for secondary letting); and
• the extent to which the licence holder has complied with the conditions of the licence (which might affect a renewal fee).

3.20. The Scottish Government encourages licensing authorities to consider each of these criteria, even if they subsequently deem some may not be suitable for their local circumstances.

3.21. The Scottish Government encourages licensing authorities to establish a licence fee structure that takes account of the following as a minimum:

• type of licence: with fees set accordingly in relation to home sharing, home letting and secondary letting licences; and
• guest capacity: with fees set accordingly in relation to the intended maximum number of guests, as requested by the host or operator on their application form.

3.22. Whatever basis licensing authorities set their fees, they must be calculated according to cost recovery only.

3.23. Note that a licensing authority may specify a maximum occupancy for safety reasons that is lower than the number of guests an applicant has requested. In this instance licensing authorities may choose to, but do not have to, refund the difference between the fee paid and the fee that would have been paid had the application specified the maximum occupancy figure.

3.24. Within this recommended fee structure, licensing authorities may decide to group guest numbers into bands. An example banded fee structure is set out below: