There’s a piece in the Guardian on collapsing providers of high-end student accommodation.
It’s mainly a market story – too many blocks in some cities, a third year of falling international recruitment, and Unite shrinking towards fewer, “stronger” university cities.
But follow up the buildings it names and a harder point emerges.
There’s been plenty of angst about what would happen if a university went bust.
But market exit risks are starting to manifest in their halls, and the protection on offer there is, if anything, thinner.
Marketgait Apartments in Dundee is a 116-room block that a fund manager bought out of a previous insolvency for £1.55m in 2015.
Three years later it sold it for £9.5m to a Jersey company owned by real estate manager 90 North and Kuwaiti investor Rasameel.
Barclays’ £5.7m loan fell due last October and wasn’t repaid. In February the Royal Court of Jersey agreed to ask the Court of Session to appoint administrators – partly because administration, unlike a Jersey désastre, would let students stay put while the rent kept coming in.
The court heard that cladding costs, which weren’t reflected in the accounts, had tipped the company into insolvency. Even so, on 23 June operator Prestige Student Living was still telling Facebook that rooms were going “but not for long!”
On 15 July the administrators went in. The fire safety works couldn’t be funded, and the building shut with 68 rooms let, 27 of them renewals for this year.
As the Guardian reported last month, students – many of them abroad for the summer – got about a month to get out, and some paid third parties to store their pots and pans.
Prestige says it refunded everything paid to it. The block has since been sold to a Perthshire developer for £1.2m, around an eighth of its 2018 price.
Then there’s Amare Students, a 64-unit converted care home in Selly Oak that went into administration just before Christmas.
The administrators’ proposals are quite the read. Advance rent paid by students for 2025-26 had gone into shares, options, crypto, forex, and commodities.
The director’s loan account was around £734k overdrawn, and the business could neither fund critical maintenance nor service a £15.65m mortgage.
Students stayed housed only because the lender put in £264,500 to keep the building trading, on the basis that a let building sells for more than an empty one.
Meanwhile £49,500 of student deposits sits on the unsecured creditors list with no return expected, alongside student letting agents in Beijing and Hong Kong.
In Belfast, 393-bed Alma Place went into receivership after its Chicago owner’s rescue deal with a Bahraini investor fell through, and its UK operating company was later liquidated with a £38.2m deficiency.
The building kept running and was sold in January.
And in Coventry, receivers of a 91-room studio block on St Columba’s Close now have permission to let 50 rooms to car plant and water company workers.
They blame a bust contractor, falling international numbers, and a 57 per cent collapse in enquiries.
There will be more. As research intensives expand and drop their entry requirements, the mobile, residential student – domestic and international – gets sucked up the pipe.
That leaves blocks elsewhere built on assumptions about who would turn up, just as more students commute from home because they can’t afford the rent.
Meanwhile, the sector’s protection debate is almost entirely about providers. Over the summer the OIA and SUMS published the student experience of closure, which repeats the call for a proper protection regime.The Education Committee also wants clearer insolvency arrangements.
All of that matters – but it’s easy to imagine that students could lose their home or their money at a perfectly solvent university, living in a block owned by an offshore special purpose vehicle.
The report’s findings read across. Students were angry that providers kept recruiting while they knew they were in trouble – Prestige was still marketing rooms more than four months after the Jersey court order.
They found out late, with no plan – Dundee’s students got a month, many of them from abroad.
International students were hit hardest in both cases, because they’re the ones paying a year up front for lack of a UK guarantor.
The report’s students asked “what will happen to my money?” In Birmingham, the director had put it into crypto and forex. The report also argues that students need independent advice because a failing organisation’s legal duties run to its creditors.
That’s how the Jersey court reasoned – it wanted the students kept in place because that would get creditors a better return.
A PBSA contract is a consumer contract, and the CMA’s refreshed unfair terms guidance from July is pretty clear. When a consumer has to pay can be assessed for fairness, even though the price itself can’t. Making consumers carry risks the trader is better able to bear creates a significant imbalance.
Terms requiring payment in full, or nearly in full, before the trader has performed are more likely to be unfair – partly because the consumer could lose their money if the trader becomes insolvent.
Where there’s exceptionally a good reason for full payment in advance, the guidance says the money should be:
…held under secure arrangements which protect it in the event of the trader’s insolvency.
Yet common practice for international students without a UK guarantor is a year’s rent, up front, straight into the operator’s account.
Many will assume the Renters’ Rights Act fixed that by capping rent in advance at a month. For halls, it didn’t. The ban on pre-tenancy rent only applies to assured tenancies, and operators in an approved code have been taken out of the assured regime altogether.
Since January, Christmas savings clubs have had to hold customers’ money on trust or insure it. A year’s rent paid to a Jersey company needs neither.
Unfair terms law alone won’t fix things. A finding that a term is unfair lets a student refuse to pay, or claw money back from a solvent operator. Against an insolvent one, a refund claim is just another unsecured debt.
So the protection has to be in place before the money moves.
The government granted halls their exemption on the basis that the approved codes protect tenants “in an effective regulatory manner.”
MHCLG approves the codes, and an operator expelled from one finds its new lets become assured tenancies – with the one-month cap back in force. That’s a pretty big stick.
MHCLG should tell the code operators – ANUK/Unipol for private blocks, plus the codes covering university-run halls – to make protecting anything beyond a month’s or a term’s rent a condition of membership, through trust, escrow, or insurance along the lines the CMA describes.
DfE’s statement of expectations last month said nothing about any of this, which won’t surprise anyone. It ought to expect universities not to nominate to, list, or partner with operators that take unprotected advance rent, and it ought to be asking the CMA to look at the sector’s payment terms.
Getting the CMA to lift a finger would work UK-wide, because the Consumer Rights Act does. The National Codes cover the whole UK too, but expulsion only changes tenancy status in England, so the stick is weaker elsewhere.
Scotland’s PBSA review, promised back in 2021, has so far produced a consultation on notice periods that closes on 22 October. It came out a fortnight after Marketgait’s administrators went in, even though the government’s own scoping work flagged international students’ financial risk years ago. Wales and Northern Ireland have their own versions of the gap to look at.
The policy conversation about student protection pictures a university going under and its students needing a teach-out.
What’s also happening is a student who paid a year’s rent to a company in St Helier finding out they have a month to get somewhere else – or that their money went into crypto – and that in law they’re an unsecured creditor of a property vehicle.
The fix is easy, the CMA has already written it down, and at least in England, the government departments with the leverage to make it happen could do so tomorrow. Someone just needs to notice that students rent rooms as well as attend universities.