Deregulating the 90-day rule - is it a threat?

Adoption of Clause 34 as part of the Deregulation Bill is unlikely to have a significant impact.

19 November 2014, words by Marie Hickey

 

■ The focus on C1 expansion to legitimise the sector was in response to the fact that, historically, the bulk of stock was made up of standard residential with a C3 designation. In London, this meant units could not be 'legally' let for periods of less than three months under the 90 day rule, unless they were in receipt of a daily letting license.

■ Operators did not always conform to this rule and if caught by the Local Planning Authority would vacate the property. This generated some operational uncertainty and in turn reduced investor confidence.

■ Operation with C1 consented property has helped to resolve this issue. However, Clause 34 of the proposed Deregulation Bill has raised concerns. An overview of the Bill can be found below.

 
"We suspect that the relaxation of the rule will be restricted to owner-occupiers and is unlikely to be available to commercial landlords"
 

■ The issue is that deregulation could 'legalise' a huge swathe of London residential property for nightly stays, generating significant competition for C1 operations. As residential operations would be liable for the less onerous Council Tax, whereas C1 providers are required to pay Business Rates, would also put them at an unfair advantage.

■ The Association of Serviced Apartment Providers (ASAP) responded to the Bill welcoming the review of the legislation but highlighted the need to consider the safety and welfare of the guest in any deregulated market.

■ At this stage, it would appear that Clause 34 will be adopted without amendment. We suspect, however, that it will be restricted to owner-occupiers in order to support the sharing economy initiative rather than being available to commercial landlords, thus mitigating the potential risk to the sector. Although we will have to wait and see if and how the Clause is utilised.

Deregulation Bill

London's 90-day rule under review

■ The Deregulation Bill was introduced to the House of Commons in January 2014. The purpose of the Bill is to remove or reduce burdens on businesses, civil society, individuals, public sector bodies and the taxpayer.

■ Clause 34 of the Bill will provide the Secretary of State the power to relax restrictions, known as the 90 day rule, related to the short-term letting of residential property in Greater London subject to it not being deemed as a material change of use.

■ The 90-day rule (section 25 of the Greater London Council Act 1973) was implemented to protect London's housing, to the benefit of permanent residents, from the conversion to short-term lets. A short-term let was deemed a stay of less than 90 days. Holiday home-swap websites and use of Airbnb, amongst others, led to calls to relax the rule.

■ Adoption of the Bill will not necessarily mean all residential property can be let for periods of less than 90 days. Clause 34 provides the Secretary of State the power to amend section 25 setting out circumstances in which the use of residential property as temporary accommodation does not involve a material change of planning use. The new clause will also allow the Secretary of State or the local authority to exclude particular residential premises and particular areas from any relaxation of section 25.

■ As a result we suspect that the relaxation of the rule will be restricted to owner-occupiers and is unlikely to be available to commercial landlords.

 

 
 

Key Contacts

Marie Hickey

Marie Hickey

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 3320 8288

 

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