Scottish holiday lets: potential changes to council tax, rates and licences, new rules explained
Short-term lets and holiday homes can often get a bad reputation – neighbours hate the potential anti-social behaviour associated with frequent guest changeovers and landlords and potential landlords can find the process overwhelming.
The latest hurdle is a change to Scottish Government law in October, when rules around holiday lets in shared stairwells or larger properties will change. This, coupled with potentially soaring council tax bills, is worrying many landlords or potential investors.
Owners are facing the prospect of footing the bill themselves, passing it on to tenants, and risking losing that business due to increased costs, or selling up. But is there another way?
“Being canny with how you let a second property is definitely key,” says Ben Alexander, Director of New Business at property management firm DJ Alexander.
“Everyone’s heard nightmare stories; with higher bills in the pipeline, many people with second homes are losing faith in the property market. In some cases, people with money to invest are no longer see bricks and mortar as the safe, problem-free place of old to put their money.
“But there is always a place for good, responsible landlords, and with the right support you can receive a decent year-round income, with none of the headaches.”
The current system
While regulated, the rules on second home ownership in Scotland are relatively relaxed, whether the property is occupied part-year round by family or all year round by paying guests. Owners currently pay between 10 and 50 percent council tax on the second home – as determined by their local council – and can run it as a business as they see fit.
The pitfalls, of course, include cleaning on changeover days, managing the bookings and income, finding time to carry out maintenance and ensuring that your transient guests don’t become nightmare neighbours.
In April 2023 First Minister Humza Yousaf announced a planned shake-up of council tax with the proposals aiming to strike a balance between ensuring there was a good housing supply, and supporting communities that rely on tourism.
Consultations are currently underway, but the headline grabber is that from April 2024 local councils may be allowed to charge up to double the full rate of council tax on second homes, bringing them in line with long-term empty homes.
A new system for licensing holiday lets is likely to come into place this October, slightly later than originally planned.
Ben added: “The uncertainly is definitely concerning current landlords and those thinking of investing, and will likely hit short-term holiday lets in particular; many will be reconsidering their options for the upcoming legislation. Those whose homes are occupied by guests for 70 nights or more a year may also find themselves being liable for non-domestic rates.”
Is there a better way?
For many, leaving the holiday market behind will be a juncture in terms of deciding the best route forward for the property, says Ben, whose firm is one of the leading property management companies in Scotland.
“People see the initial income per night from holiday lets and find that a very attractive proposition. But changes to the legislation, plus the ongoing day to day, or weekly changeover hassles and bookings, soon become draining.
“Finding more traditional tenants looking for medium to long-term tenancies has a lot of benefits. Most obvious is that you have a steady and consistent income stream all year round. Long-term tenants are more invested in the property and treat it as their own home – this means ongoing maintenance costs are likely to be reduced.
“And with long-term tenants they are liable for utility bills and council tax, meaning the landlord doesn’t have to pay over the odds, whatever the legislation change decides.”
Tenants paying their own energy bills means the landlord doesn’t have to be too concerned about fluctuating gas and electricity prices either.
How a management company can help
A firm that can manage your property for you, vet clients, hold deposits and carry out maintenance makes a big difference to landlords and potential investors: Ben added: “Now is a great time to considering long term rental as a positive alternative. In Edinburgh and many other cities the tenant demand is high due to a shortage of supply in properties, so rents are strong and securing quality tenants with support from a letting manager is a good option.
“Our experts are happy to give advice on entering the long-term rental market ahead of October’s changes as we can help prepare people as best as possible.”
Find out more at www.djalexander.co.uk.