IAIN MUIRHEAD AND DICKINS EIDNBURGH LTD FOR JUDICIAL REVIEW

Factual and Procedural Background

The petitioners, comprising an individual who is the sole director and shareholder of a property-owning company and a property management company, challenged the respondent's designation of the entire city as a short-term let control area under section 26B of the Town and Country Planning (Scotland) Act 1997. The respondent designated the area with effect from 5 September 2022, deeming the use of a dwellinghouse for short-term lets within the control area to involve a material change of use requiring planning permission. The petitioners sought declarators that this designation and its retrospective application were unlawful, irrational, and inconsistent with planning control principles, and sought reduction of the respondent's amended guidance. The respondent opposed the petition, maintaining the correctness of its interpretation and the lawfulness of its guidance and enforcement actions. The court was tasked with resolving the scope and effect of section 26B(2), particularly whether it applied retrospectively to changes of use predating the designation.

Legal Issues Presented

1. Whether section 26B(2) of the Town and Country Planning (Scotland) Act 1997 applies retrospectively to changes of use to short-term lets occurring before the designation of a short-term let control area.
2. Whether the respondent's amended guidance adopting a retrospective interpretation of section 26B was irrational or unlawful.
3. Whether the respondent's policy requiring planning permission or confirmation thereof as a precondition for short-term let licensing applications exceeded lawful requirements.

Arguments of the Parties

Petitioners' Arguments

• Section 26B should be construed as applying only to changes of use occurring on or after 5 September 2022, not retrospectively.
• Applying section 26B retrospectively would significantly alter the planning regime and impose unfair obligations on operators who lawfully changed use before the designation.
• Four scenarios were identified where operators lawfully used properties for short-term lets before the designation, none of which should require retrospective planning permission.
• The respondent’s approach was irrational and inconsistent, particularly in enforcement actions and guidance.
• The policy requiring planning permission as a precondition for licensing exceeded statutory requirements where no material change of use or breach existed.
• The retrospective application would unlawfully interfere with the petitioners' possessions under Article 1 of Protocol 1 of the European Convention on Human Rights, supporting their interpretation.

Respondent's Arguments

• Section 26B(2) applies prospectively from the designation date and does not have true retrospective effect.
• The deemed change of use applies to all uses of properties as short-term lets on or after 5 September 2022, requiring planning permission accordingly.
• The provision does not operate unfairly, as operators without planning permission before the designation must apply for it to continue lawful use.
• Enforcement notices served on that basis were rational and lawful, including an "esto" approach covering alternative legal grounds.
• The policy requiring planning permission or confirmation thereof facilitates dialogue and compliance and does not exceed statutory requirements.
• The licensing scheme provides visibility of short-term let properties, addressing concerns about enforcement and compliance.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by situating section 26B within the statutory framework of the 1997 Act, noting that planning permission is required only for development, including material changes of use, and that such permission is spent once the change is effected. The court rejected the respondent's interpretation that section 26B(2) applies retrospectively to all existing short-term lets as of the designation date, finding that the statutory language and scheme more sensibly support application only to changes of use occurring on or after 5 September 2022.

The court identified logical inconsistencies and unfairness in the respondent's approach, notably the disparate treatment of operators with planning permission or certificates of lawful use compared to those without. The court emphasized that events constituting a material change of use prior to the designation are vested rights with legal consequences, including rights to continue use and potential compensation under section 71, which would be unfairly undermined by a retrospective application.

Applying established principles against retrospective legislation unless expressly intended, and considering fairness and vested interests, the court found no clear indication that the Scottish Parliament intended section 26B to operate retrospectively. The court accepted the petitioners’ interpretation as consistent with legislative intent, statutory scheme, and principles of fairness.

Regarding the petitioners’ other grounds, the court found that the respondent's enforcement approach was not irrational, as it prudently covered alternative legal bases. The policy requiring planning permission or confirmation thereof for licensing applications was not unlawful, although it would need to be amended in light of the court’s interpretation. The court noted that the licensing application form's wording went beyond lawful requirements by discouraging applications where planning permission was not in place or pending, but since the petitioners did not seek reduction of the form, no order was made.

Holding and Implications

The court sustained the petitioners' pleas-in-law, repelled the respondent's pleas, and granted the declarators and reduction of the guidance amendment sought by the petitioners. The respondent was found liable in the expenses of the petition.

The direct effect is that section 26B(2) does not apply retrospectively to require planning permission for changes of use to short-term lets occurring before the designation date of 5 September 2022. The respondent must amend its guidance and policies accordingly. No new legal precedent was established beyond the interpretation of section 26B and its non-retrospective application. The decision preserves the legal rights of operators who lawfully changed use before the designation, while maintaining the respondent’s ability to regulate future changes of use under the planning regime.