Do part-time hosts know all the pitfalls they could face?

Gillian Black on whether we’ve reached peak Airbnb

With the rising demand for Airbnb properties and continuous listings growth across Edinburgh and further afield, property owners riding the wave of Airbnb may not have not delved deeper to ensure they are fully aware of their legal obligations.

Airbnb has been fuelling a private letting frenzy in Scotland’s capital over recent years.

The figures are astonishing: a recent report by Colliers International showed that last year Airbnb bookings in Edinburgh leapt 70 per cent to 1.1 million.

Scottish landlords earned £113.4 million in Airbnb bookings in 2017 alone.

It may seem like there is easy money to be made for landlords, and many flat owners are also venturing into the world of Airbnb, perhaps looking only at the potential profits.

However, with local councils, including Edinburgh City Council, considering how to regulate Airbnb, for Airbnb landlords, now is the time to take stock of the situation and make sure you are not only aware of the legal requirements, but also consider whether being an Airbnb host will continue to be financially viable.

In other European city destinations there has recently been a local backlash against the scale of the rise in Airbnb properties.

In April, Venice capped the amount of time hosts can rent out their homes to 120-nights a year. The following month Madrid also introduced a cap – of 90 rental nights per year.

Edinburgh City Council is currently considering both a rental nights’ cap and a licensing regime that could limit the number of Airbnb properties in the city.

We have perhaps reached ‘peak Airbnb’ in the capital.

The service will continue to operate in the future, but the imminent arrival of legislation means that landlords can expect their income to be squeezed and a clampdown on requirements to be able to carry out short term lets.

But before these changes even come into place there are already a number of legal requirements landlords need to be aware of to ensure they don’t fall foul of potential ramifications.

Standard buy-to-let mortgages do not permit short term lets so the correct mortgage product should be in place, likely to be a special holiday lets mortgage.

If your lender discovers you have the wrong mortgage, the bank is entitled to ask you to repay in full immediately.

Title deeds may not be designed to all allow short term lets. Check your deeds through Registers of Scotland or ask your solicitor to, or you could face potential legal action from neighbours, who may try and enforce any condition in the title prohibiting short term lets.

In terms of taxation, homeowners can receive up to £7,500 annually by renting out a furnished room in their own home, however, if the rental income exceeds this amount then it will be subject to normal income tax rates.

And if you don’t live in the property and simply own it as a rental investment, then it is your responsibility to set aside tax payments.

Airbnb offers a diverse and varied accommodation mix to tourists and while this can be a useful income stream for property owners, we recommend you weigh up the pros and cons rather than simply following the crowd.