The Government has announced it intends to remove rules that restrict the short-term rent of residential properties in London.

Background
The rules were introduced by the Greater London Council (General Powers) Act 1973 (and amended by the Greater London Council (General Powers) Act 1983). Under these Acts, use as temporary sleeping accommodation in exchange for money or by reason of employment is considered a material change of use of the premises. This means that in order to rent out a property or offer it to an employee for less than 90 days planning permission may be required. Breach of the rules can lead to a fine of up to £20,000 (or an unlimited fine in the Crown Court).

The rules do not apply outside of London. The original justification for the restriction included preserving the rental market for longer terms residents and minimising the transient population.

Whilst most London Councils do not require planning permission for short-term lets, others such as Camden, Kensington and Chelsea, Southwark and Westminster have policies against short-term lets. Within the City of Westminster, in particular, this has been a long running issue as the Council have taken a strict approach to enforcement.

Opportunities
The issue has become of increasing importance with the popularity of internet sites that enable users to offer short stays in their homes and was highlighted in particular during the 2012 London Olympics.

Although subject to consultation, if the Government removes the restriction in its entirety property owners will gain substantially greater freedom to take advantage of market changes and peaks in demand for short term lets. Amongst the businesses expected to benefit are those with student housing portfolios, hotels with residential holdings and those that provide accommodation to seasonal staff. Student rooms could be leased over the summer months without the need to apply for planning permission and vacated residential properties could be opened up to short lets dependent on market demand. Planning permission will however continue to be required for use of residential properties as hotel or hostel accommodation and pre-existing restrictive conditions or planning obligations would need to be renegotiated.

The Government has announced that it will be holding a consultation on the proposals with the intention of introducing the changes through the Deregulation Bill.