Edinburgh City Council's licensing scheme for short-term lets has been ripped up by a judge - less than four months before it was due to come into force.
A bombshell ruling from the Court of Session concluded parts of the new policy designed to regulate Airbnb -style accommodation in the city was unlawful.
It comes following Scotland's largest ever crowd-funded legal challenge, which saw operators and landlords take the council to court last month.
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The four petitioners raised £300,000 to fund the judicial review and argued the scheme was “onerous and oppressive” and went beyond the aims originally set out by the Government, which were to improve guest safety.
And they hailed the decision as "a victory for law and common sense" and said it should signal a "fresh approach" to short-term lets licensing from the council and Scottish Government.
Housing campaigners said it "flies completely in the face of democracy and the will of the people" however as "an overwhelming majority of people in this city support tighter restrictions on STLs".
Edinburgh City Council leader Cammy Day said he "welcomed" the ruling, and said the council would consider their next steps "in detail."
Holiday let hosts were required to submit an application by October 1, a deadline which was extended from April, however this is now likely to be revised again as the council deals with the fallout.
Lord Braid, who listened to arguments from both sides during the two-day hearing, ruled that a 'rebuttable presumption' against granting licenses for secondary lets - an entire property that is not an operator's principal home - within tenement blocks was unlawful.
He also found the lack of provision for temporary licences and requirement for some hosts to supply floor coverings went beyond the council's powers.
A statement issued by petitioners following publication of the judgement on Thursday (June 8) said: "We have yet to fully digest the detail of the decision but we hope that this will give common cause to both the Scottish Government and City of Edinburgh Council to seek a fresh approach that aims to collaborate and work with local operators of self-catering accommodation, recognising the many good things it brings to the economy and people of Scotland.
"As the largest crowd funded case in the history of the UK, the petitioner team are deeply grateful to the many small, local businesses that supported the campaign financially in such uncertain times. That grass roots support made it possible for us to take this action, challenging both licensing and planning surrounding short term lets in Edinburgh and the potential wider impact across urban and rural Scotland. "
Fiona Campbell, chief executive of of the Association of Scotland’s Self-Caterers, said: “We are pleased this decision from the Court of Session confirms that City of Edinburgh Council’s short-term let licensing policy was unlawful in respect of the rebuttal presumption and contravenes Provision of Services Regulations.
"We pay tribute to the determination and courage of the four petitioners, and are extremely thankful to all those who donated and the superb legal team. This was a team effort and they can be incredibly proud of what they achieved.
"The impact of this will not be confined to the capital as the decision has ramifications for licensing schemes across Scotland.
"The Scottish Government need to go back to the drawing board on short term let regulation and engage constructively with industry to provide a regulatory framework that works for all stakeholders.
"The time to act is now and the ASSC has pragmatic, fair and proportionate policy solutions which can assist.”
Eilidh Keay from tenants' union Living Rent Edinbrugh said the decision "demonstrates how a small group of people can use their money and power to weaponise the legal system to their advantage".
She said: "This flies completely in the face of democracy and the will of the people.
"Edinburgh needs homes, not holiday lets. In coming down in support of short term let operators, this decision seems to have forgotten that Edinburgh is in the midst of a housing crisis.
"It is disgusting that the profit of short term let operators should be put before the needs of tenants, residents and communities for homes."
Edinburgh Council leader Cammy Day said: “I’ve received today’s judgement and am pleased that we’ve been successful in defending large parts of our policy.
“While I’m obviously disappointed that the court didn’t find in favour of our policy on secondary lets, I make absolutely no apology for seeking to protect our residents.
“It’s no secret that we face unique housing pressures here in Edinburgh, with a small but densely populated city centre and fast growing population, and it's crucial for us to strike the right balance between promoting our visitor economy while looking after the people that live here all year round.
“Our residents have told us that, in many cases, STLs are hollowing out their communities, reducing housing supply and increasing housing costs. We can’t forget that many have endured years of disturbance and anti-social behaviour and we will continue to work hard to get this right.
“The court acknowledged our intention to find a solution to this and agreed that it was legitimate to use both planning and licensing policy. We welcome the clarity he’s provided and will now consider our next steps in more detail.
“We remain committed to ensuring the whole city benefits from our thriving visitor economy but it has to be managed and it has to be sustainable – and I continue to believe that fair and effective STL controls would be an important step in the right direction.”
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