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Real Estate Horizons

Real Estate Horizons is a snapshot of key legal topics and market trends across the globe.

In the spotlight: student accommodation

By John Condliffe and Jane Dockeray

Purpose built student accommodation can be an attractive investment. The UK has seen a significant increase in this asset class but the industry is mindful of its future. Here are some of the key threats and trends affecting the market at the moment.

Rights of residential tenants - Student accommodation is regarded as residential property and tenants of residential property have additional statutory protection. Investment into student accommodation must be structured carefully to avoid giving third parties a right to acquire the freehold of a building, require the grant of a lease extension of 90 years in return for the payment of a premium, or exercise rights to manage the building.

Upcoming law reforms – Both the right to manage and the right to acquire the freehold are under government scrutiny and reform is on the radar although the extent and exact timescale is currently not known.

The government has also introduced legislation which restricts landlords and letting agents from charging residential tenants and occupiers (including those in student accommodation) any fees other than those expressly permitted by the legislation. This will not prevent recovery of such fees through higher rents although no spikes in rent at the start of the letting are permitted. This law comes into effect on 1 June 2019.

Additionally, the government will make it mandatory for all private landlords of residential property, regardless of whether they employ a managing agent, to be a member of a scheme for remedying complaints. Notably, this includes all private providers of purpose built student accommodation.

The Brexit impact – The UK is particularly concerned about the Brexit impact and whether postgraduate numbers will be affected. This could have a knock on effect in terms of quality of provision, research, and reputation if universities start to lose their postgraduate students. Competing institutions in other countries would be keen to pick up on lost numbers.

Long term vision - The industry needs to monitor emerging markets such as China and India, and the changing higher education culture (shorter degree courses and the rise in online courses) to future- proof the appeal of the UK higher education market.

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