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Short term rentals – a potential planning issue?

The recent decision in Iveta Nemcova v Fairflied Rents Limited [2016] UKUT 303 underlined the importance of reviewing lease terms (in particular, the user covenant) prior to letting residential property on a short term basis, as set out in our alert.  It therefore seems timely to reflect upon the potential planning issues raised by short term rentals, particularly given the rising popularity of websites such as Airbnb and onefinestay.

airWhat’s the use?

From a planning perspective, permanent use of residential property for temporary sleeping accommodation constitutes a material change of use for which planning permission is required.

Short-term lettings in Greater London are also subject to a further planning restriction in the form of Section 25 Greater London Council (General Powers) Act 1973. This makes the use of residential premises as temporary sleeping accommodation for less than 90 consecutive nights a material change of use requiring planning permission.  The purpose behind the provision is to protect London’s permanent housing supply.

The Government introduced an exception to this restriction in the Deregulation Act 2015.  As a result, short term lettings in the capital are no longer deemed a material change of use if:

  1. the cumulative number of nights use as temporary accommodation does not exceed 90 nights in any one go (or any calendar year); and
  2. the person providing the accommodation is liable to pay council tax.

Such use may, nonetheless, be classed as a material change of use under Building Regulations. Consequently, upgrade works may still be required to comply with relevant standards.

The new rules also grant the Secretary of State power to create further exceptions by way of regulations, albeit subject to approval by both Houses of Parliament.

Motivating factors

The Government’s rationale for relaxing the rules was set out in ‘Promoting the sharing economy in London – Policy on short-term use of residential property in London’, which came out of a wider review of property conditions in the private rented sector.  In short, the changes were intended to give Londoners the opportunity to earn extra income renting out their property and expand the pool of competitively priced accommodation in the capital, while removing uncertainty caused by inconsistent enforcement of section 25 across London Boroughs.

Safeguards

The new 90 day cap was imposed to prevent permanent temporary sleeping accommodation use. As a further safeguard, local authorities can direct that the new rules do not apply to: (i) a particular residential premise (for example, where there has already been enforcement action against a statutory nuisance); or (ii) a particular area.  However, local authorities can only use this power with the consent of the Secretary of State where it is “necessary to protect the amenity of the locality”.  Time will tell whether these safeguards prove to be effective.

Policy conflicts?

The reforms are consistent with the Government’s broader objectives of relaxing planning laws and reducing the burden of unnecessary change of use applications. However, they would appear to be at odds with the Government’s drive to increase the supply of homes.  It is therefore doubtful that the Secretary of State will make further exceptions to section 25 in the near future.

Code breaker?

The Government announced national standards for new homes in March this year alongside the enactment of the Deregulation Act 2015. The Ministerial Statement accompanying the Act explained that tougher Building Regulations requirements will make it unnecessary to apply the Code for Sustainable Homes in a planning context. The Act withdraws authorities’ powers to impose conditions requiring energy efficiency standards above Building Regulations requirements (which are themselves moving towards the 2007 goal of zero carbon homes by 2016). The new regime introduces ‘optional’ Building Regulations (Regs+) requirements (known as the new National Technical Standards) that authorities can chose to apply to new permissions.

The policy in the Ministerial Statement includes a requirement that:

From the date the Deregulation Bill 2015 is given Royal Assent, local planning authorities and qualifying bodies preparing neighbourhood plans should not set in their emerging Local Plans, neighbourhood plans, or supplementary planning documents, any additional local technical standards or requirements relating to the construction, internal layout or performance of new dwellings. This includes any policy requiring any level of the Code for Sustainable Homes to be achieved by new development; the government has now withdrawn the code, aside from the management of legacy cases.

This has understandably led to suggestions that the Code ‘no longer exists’ for new planning applications.

codeIn fact, the law allowing authorities to impose Regs+ requirements are unlikely to come into effect until late 2016 (when the enhanced Building Regs are expected to be in effect).

The transitional provisions buried in the Ministerial Statement are therefore important – they make it clear that as a matter of national policy:

  • authorities can continue to apply code style energy efficiency conditions, as long as they are based on local plan policies and do not exceed Code 4, until the new Building Regulations requirements come into effect in 2016;
  • existing policies on access, internal space and water efficiency can only be reflected in new planning conditions – after September 2016 – where consistent with the National Technical Standards. The standards can then only be applied where there is a ‘relevant’ Local Plan policy.