Assignable Contracts Student Accommodation UK

Understanding contract assignments for purpose-built student accommodation and student property investments

Assignable contracts can provide investors with a potential way to transfer their contractual position before completing a property purchase. In the UK student accommodation market, this can be relevant to off-plan purpose-built student accommodation (PBSA), student apartments and other developments where the purchase agreement expressly permits assignment.

London's adopted Purpose-built Student Accommodation Guidance describes PBSA as specialist housing designed and managed for students, typically including studios, shared student flats and communal facilities.

What are assignable student accommodation contracts?

An assignable contract is a property purchase agreement that allows the original purchaser to transfer their contractual rights to another buyer before completion.

For example, an investor could enter into a contract to purchase an off-plan student apartment. If the contract permits assignment, the investor may later transfer their contractual position to another purchaser instead of completing the purchase themselves.

The exact procedure depends on the contract, developer and structure of the transaction.

Where assignable student property opportunities may arise

Investors researching assignable contracts may encounter opportunities in university cities and towns such as:

• London

• Manchester

• Birmingham

• Leeds

• Liverpool

• Sheffield

• Nottingham

• Leicester

• Bristol

• Newcastle

• Coventry

• Nottingham

• Glasgow

• Edinburgh

The type of student accommodation can vary considerably. Some developments consist mainly of private studios, while others provide cluster apartments with shared kitchens and living spaces.

How a student accommodation contract assignment works

The first step is checking the original purchase agreement to establish whether assignment is permitted.

If assignment is allowed, the investor should establish whether the developer requires written consent, whether an administration or assignment fee applies and whether the assignment must occur before a specified date.

The incoming purchaser will generally need to complete the required legal documentation and satisfy any conditions contained in the original agreement.

A solicitor should review the original contract before the investor commits to an assignment strategy.

Developer restrictions are important

Student accommodation contracts are not automatically assignable simply because the property is being sold off-plan.

A developer may:

• Prohibit assignment

• Require written consent

• Charge an assignment fee

• Restrict assignment to a particular period

• Limit the number of assignments

• Require details of the incoming buyer

• Impose specific completion conditions

These provisions should be established before purchasing.

Student accommodation and SDLT

The SDLT treatment of student accommodation can depend on the nature and use of the property.

HMRC distinguishes between traditional halls of residence connected with an educational establishment, specialist student accommodation owned by private operators and ordinary residential properties that happen to be occupied by students. These categories can have different SDLT treatment.

This makes it important to establish exactly what type of student accommodation is being purchased rather than assuming that every student property receives the same tax treatment.

SDLT on an assigned student property contract

Assignments themselves can create additional SDLT considerations.

HMRC's pre-completion transaction rules apply where, before the original contract is substantially performed or completed, another agreement gives a different person the right to call for the conveyance of the property.

For an assignment of rights, HMRC states that the transferee's consideration can broadly include what they give under the original contract plus what they give for the assignment.

HMRC's example uses a £1 million purchase contract and a £100,000 assignment payment, with the eventual purchaser's chargeable consideration calculated at £1.1 million in that example.

Because the tax position depends on the transaction structure and property type, investors should obtain professional SDLT and legal advice before proceeding.

What investors should check before buying

An assignable student accommodation contract should be assessed beyond the headline purchase price.

Investors should consider:

• Whether assignment is permitted

• Developer consent requirements

• Assignment fees

• The development's planning status

• Expected completion date

• Student demand in the location

• University proximity and transport connections

• Rental or management arrangements

• Service charges

• Ground rent provisions where applicable

• Lease length

• Management fees

• Developer reputation

• Financing options

• SDLT treatment

• Potential resale demand

For PBSA developments, the planning position can also be particularly important. London's Policy H15 requires student accommodation to be secured for student use and includes requirements around nominations and affordable student accommodation.

Student cities to research

The UK has established student property markets across several major university locations.

Investors researching assignable student accommodation may look at London, Manchester, Birmingham, Leeds, Liverpool, Nottingham, Sheffield, Bristol, Newcastle, Leicester, Coventry and other university cities.

The investment characteristics can differ substantially between locations. University enrolment, local housing supply, transport, development pipeline and the type of accommodation should all be considered when assessing a particular contract.

Risks of buying an assignable student accommodation contract

Assignment can provide a potential exit route, but it does not guarantee that another investor will purchase the contract.

Before proceeding, investors should consider:

• Whether the contract is genuinely assignable

• Whether developer consent is required

• The assignment deadline

• Current market value

• Construction progress

• Completion risk

• Student demand

• Management arrangements

• Service charges

• Financing availability

• SDLT implications

• Legal costs

• The possibility of completing the purchase if an assignment cannot be achieved

An investment strategy based entirely on finding another buyer before completion can therefore carry significant uncertainty.

Fraser Bond support for student property investors

Fraser Bond can assist investors researching UK property opportunities, including student accommodation and investment properties in major university cities.

As a full-service property consultancy, Fraser Bond supports clients with property acquisition, investment advice, sales, lettings, property management and wider property requirements.

If you are considering an assignable student accommodation contract, Fraser Bond can help assess the property and wider investment requirements, while specialist solicitors and tax advisers can advise on the contractual and SDLT aspects of the transaction.