Guest House for Sale in Scotland: What Happens to the Short-Term Let Licence When You Buy

This post is for a buyer of a guest house, bed-and-breakfast or letting business in Scotland. It follows the order in which you meet the questions. First, whether a short-term let licence is needed at all. Then what the seller can hand over and how a share purchase differs from an asset purchase. Last, what to ask for before you sign. "Guidance" in the brackets means the Scottish Government's short-term lets licensing guidance for hosts and operators, Part 1, and the paragraph numbers are its own.

Contents

1. Does a guest house need this licence at all?
2. Four situations at completion
3. Route one: the seller transfers the licence to you
4. Share purchase or asset purchase: what each does to the licence
5. What to request before you sign
6. Sources

1. Does a guest house need this licence at all?

Short answer: Often yes, but not if the rooms are listed in the operating plan of a premises licence under the Licensing (Scotland) Act 2005, or the building is a hotel with planning permission for hotel use. Check which of those the seller actually holds.

The 2022 order does not name guest houses or bed-and-breakfasts. A guest house is excluded only if it falls within one of the categories in Schedule 1 to the order [Order Sch 1].

The Guidance says guest houses need a licence unless exempt under Schedule 1 [Annex A para 1.9]. It adds that names such as bed-and-breakfast are not well defined, so the sign on the gate does not decide the question [Annex A para 1.31].

Two exclusions matter most to a guest house buyer.

The premises licence exclusion. Schedule 1 excludes premises holding a premises licence under the Licensing (Scotland) Act 2005 where the accommodation is listed in the operating plan [Order Sch 1]. The operating plan is the part of the premises licence that describes the layout and activities. The Guidance gives restaurants with rooms, inns and many hotels as examples [Annex A para 1.5(a)]. The exclusion turns on the operating plan, not on whether a bar exists. A bar licence that omits the bedrooms from the plan leaves the bedrooms inside short-term let licensing.

A house in multiple occupation licence does not count for this exclusion, so do not accept it as a substitute [Order Sch 1].

The hotel exclusion. Schedule 1 excludes hotels that have planning permission for hotel use [Order Sch 1]. The Guidance says the exclusion has two parts: the premises must be a hotel, and it must have planning permission to operate as one [Annex A para 1.10].

It also says the Scottish Assessors Association description of the premises may be used, and that Planning Use Class 7 covers both hotels and guest houses [Annex A paras 1.11 and 1.12]. Use Class 7 covering both means that the planning use class on its own does not tell you which of the two the building is.

Other exclusions rarely apply to a guest house, but they are worth knowing so you can rule them out in a minute:

• Aparthotels: a building of at least five serviced apartments run as one business with a shared entrance not shared with other flats.
• Hostels: non-dwelling buildings providing residential accommodation with meals or cooking facilities.
• Bothies: small buildings with no mains electricity, piped fuel or mains water, at least 100 metres from a public road and from any habitable building.
• Employer-owned staff accommodation provided under a contract or for the better performance of the employee's duties.
• Care, hospital, school, college, secure, refuge and student accommodation.

Tenancy-based lets are outside as well: protected, assured, short assured, croft, Scottish secure, limited duration, private residential and student residential tenancies [Order Sch 1]. A long let of a flat above the guest house to a resident is therefore not a short-term let.

Self-catering units in the grounds of a licensed hotel get special treatment. They are excluded only if they are on the operating plan [Annex A para 1.8]. A cottage in the garden that the seller advertises as part of "the hotel" but that is missing from the plan needs its own short-term let licence.

How to check which side the guest house falls on: ask the seller for the premises licence and its operating plan, and for the planning decision notice that describes the use. Then compare the room list in the plan with the rooms the seller lets. Any room that is let but not listed falls outside the exclusion, and the whole question becomes the licence in the rest of this post.

If the guest house does hold a premises licence with the rooms listed, a different transfer rule applies to you: the premises licence passes under section 33 of the 2005 Act, which is covered in section 3.

2. Four situations at completion

Short answer: At completion you are in one of four positions: the rooms are excluded, the licence is transferred, a fresh application is pending, or no licence exists at all. Each one decides whether you may take a booking on day one.

The table sets out what each position means for the first booking. Each row shows what the position means for the first booking.

Two points follow from the table.

First, the third row is the common one for a buyer who does not plan the application in advance. A buyer who completes first and applies afterwards starts the council's decision clock on completion day, not before. The council has up to nine months to decide.

Second, the first row is a trap for the buyer who assumes the exclusion carries over. A premises licence also belongs to a named holder. If the seller holds it and you do not, the exclusion does not exist for you until the premises licence is transferred [2005 Act s 33]. The same gap exists, in different words, on both routes.

Where the seller is a company and you buy its shares, the holder does not change. The licence stays with the company. This is a conclusion for your deal and is set out in section 4, because the council still has to be told about changes in who owns and manages the company.

3. Route one: the seller transfers the licence to you

Short answer: The seller applies to the council to transfer the licence to you. The council consults the Chief Constable, there is no presumption the transfer will be granted, and if it is granted the remaining term passes to you.

The Guidance describes the route in four paragraphs. A licence holder who is selling can apply to transfer the licence to the buyer [Guidance para 6.15]. The council consults the Chief Constable, and the time left to run on the licence passes to the new holder [Guidance para 6.16].

Transfer is subject to there being no objection from the Chief Constable [Guidance para 6.15]. There should be no presumption that a transfer will be granted, so you cannot assume that the seller's licence will pass to you [Guidance para 6.17].

The Scottish Borders Council web page adds a practical step for sellers. A seller should notify the council and give prospective buyers the information through the council's online licensing contact form. Other councils may operate differently, so ask the council for your guest house what form it uses.

What the remaining term is worth. A licence has a term of up to three years on first grant [Guidance para 3.24]. A transferred licence gives you the time left, not a fresh three years. If the seller's licence has four months to run, you start the renewal clock almost at once. Ask for the licence itself and read the expiry date before you pay for goodwill that rests on it.

What the council examines at transfer. The Guidance says the fit and proper test applies to each person named on a licence [Guidance paras 3.18 and 6.17]. The council therefore looks at you, as the new holder, much as it looks at a new applicant.

What changes the conditions. A transfer does not stop the council changing conditions at the next renewal [Guidance para 6.35]. A licence that looks light in the seller's hands can look heavier in yours.

The time it takes. Ask the council before you set a completion date how long a transfer takes, and keep the answer in writing. A transfer still pending on completion day puts you in the third position in the table above.

Seller's different plans. If you will use the premises for a different purpose, the seller should tell the council that they want to surrender the licence [Guidance para 6.14]. Surrender is an act of the seller. The licence ends, and a later buyer would apply fresh. For a guest house that you will keep as a guest house, transfer is the route.

The premises licence under the 2005 Act. If the rooms sit under a premises licence, the transfer rule is different and comes from the 2005 Act, not from the 1982 Act. The holder applies to transfer the premises licence to a named transferee who is at least 18.

The licensing board notifies the chief constable, who has 21 days to respond with a conviction notice and may recommend refusal [2005 Act s 33]. If the notice is clean and there is no recommendation to refuse or other information, the board must grant. Otherwise the board holds a hearing, and refuses if the transferee is not fit and proper or if refusal is necessary for a licensing objective [2005 Act s 33].

Two practical points follow. A conviction notice or a recommendation to refuse sends the transfer to a hearing, so ask the board for its hearing timetable. The 21 days are the chief constable's response time, so ask the board how long it takes to decide.

What to ask the seller before you rely on this route.

The questions for the seller are collected once, with the documents and periods to ask for, in section 5. The one question that belongs here is whether the seller will apply to transfer the licence as a condition of the sale agreement, and who bears the cost if the council refuses.

A lawyer can answer one question at this stage: whether the sale agreement should make completion conditional on the council granting the transfer.

4. Share purchase or asset purchase: what each does to the licence

Short answer: In a share purchase the licence holder stays the same company, so nothing transfers, but the people named on the licence change. In an asset purchase the licence is transferred or applied for afresh. This section is a conclusion from the rules, not a rule in the Guidance.

The Guidance says the licence is specific to the host, whether a person or a company, and to the premises [Guidance para 6.13]. The rest follows from that sentence.

Two warnings follow from the table.

First, a share purchase buys the company's past as well as its licence. Any suspension, revocation or false information in the company's history comes with the shares. The false-information fine is currently up to £2,500 [Guidance para 2.70]. Ask the council, not only the seller, for the licence record.

Second, a share purchase does not remove the council from the process. Persons named on the licence include directors, partners and managers [Guidance paras 3.8 to 3.13], and a significant change relevant to the licence must be notified [Guidance para 6.12]. Ask the council in writing how it treats a change in the company's directors and in who controls it, and which persons it will name afterwards.

Illustrative figures. Two directors sell all the shares in the company that holds the licence, and Ana and Ben become the directors on 1 March 2027. The licence, its term and its register entry stay as they are. What changes is the list of people the council knows about: two leave and two join.

Under an asset purchase of the same business, Ana and Ben would instead need the transfer or a fresh licence of the kind set out in section 3 or a fresh licence. Check: two directors out and two in leaves the count at two, but all the names are new, so the notice and the fit and proper test still apply [Guidance para 6.12].

The 2005 Act premises licence. If the rooms are excluded because they are in the operating plan, the same split applies to that licence. In an asset purchase the holder applies to transfer it under section 33. In a share purchase the holder is unchanged.

The building. A share purchase of the operating company does not buy the building unless the company owns it. If another person owns it, the owner's consent to the licence is still needed [Guidance paras 2.17 and 2.21].

A lawyer can answer one question here: which warranties about licence status, planning and conditions the sale agreement should carry in each structure.

5. What to request before you sign

Short answer: Ask for each document below, with its date range, and keep the replies. A missing or out-of-date document is a reason to change the price or the completion date, or to walk away.

The table collects every request once. Each row names the document, the period and the reason.

Reading the replies. A reply that matches the register and the sale contract is what you want. A reply that differs is the finding. If the register shows one holder and the contract names another, the transfer must come from the registered holder. If the live adverts show a guest maximum above the licence, fix the adverts before you take over, because the advert is evidence against whoever runs the business.

What to put in the contract. Ask your solicitor which of four terms suits a deal of your size and your lender. The first is that the seller applies to transfer or cooperates with your fresh application. The second is that completion depends on the council's answer, or the price adjusts if it refuses. The third is that the seller warrants the licence record you were given. The fourth is that the seller hands over deposits for stays after completion.

Keep the file. Put every reply, with its date, in one folder. If the council later queries a statement on your application, the folder shows what you were told and when.

The sample report shows how a finished check lays out ownership, licence and planning findings together, so that each request above ends as a line you can price or condition.

Sources

Retrieved on 2026-11-06.

• Scottish Government, Short-term lets licensing scheme: Part 1 guidance for hosts and operators, pages 1 to 6, 8 and 9: page 1, page 2, page 3, page 4, page 5, page 6, Annex A, page 8, Annex B, page 9
• Licensing of Short-term Lets Order 2022 (SSI 2022/32): legislation.gov.uk
• Licensing of Short-term Lets (Amendment) Order 2023 (SSI 2023/73): legislation.gov.uk
• Licensing (Scotland) Act 2005, section 33: legislation.gov.uk
• Scottish Borders Council, short-term let licensing, application process: page