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An ear to the ground

Investors looking to passively back a developer must back the right student developers. That is less obvious than it sounds: many residential developers have become student accommodation developers without understanding what is needed to create a successful and sellable scheme.

This is why developers need to do their research, and investors need to be confident that the developers have done just that. Any developer can look at a spreadsheet and work out that if they build 1,000 flats in a certain location and charge £200 a week, they should make a £10m profit. But the skill as we’ve seen it in student accommodation is real.

The right student developer will demonstrate deep knowledge of what is required in a market and understanding the needs of your customers (i.e. the students). They go from uni to uni. They visit the accommodation, walk around and talk to real people. They analyse pricing and supply. Some of them send their kids (or other youngsters) to pretend to be looking for accommodation. They understand the amenity and quality of what is on offer and ensure they tailor their schemes to be relevant in the particular market. That’s one of the factors that separates adequate developers from exceptional ones.

Time is of the essence

Another factor to consider with PBSA is the extra pressure of getting it finished on time.

With a residential site, if developers want to build it in 12 months but it takes 14, the pain is short-term: they and their investors are paying more bank interest and they don’t have income for eight weeks, but that’s it.

Unlike many other asset classes, timings are key in student accommodation because there is generally only one intake a year – in September. Missing an intake can have significant effects. If there is no chance of receiving any income in an academic year, the double whammy of no income and additional interest on your development finance can lead to a significant hit.

That said, there are plenty of situations where very experienced developers miss Practical Completion. If they miss September but the academic year has started, but they think they can get it done by December, they may put students up in hotels or see if a sectional completion is an option. However, this combined with the potential compensation required can become a large expense.

Things to think about in pbsa planning

A very important favourable tax treatment is stamp duty land tax (SDLT). A traditional hall of residence is treated as non-residential property which means the SDLT rate is normally about 5%. More modern cluster flat-type student accommodation is treated as residential. However, unlike for certain PBSA, the 3% surcharge does not apply.

Where more than one dwelling is acquired, the SDLT can be based on the average price of the dwellings acquired. Normally the minimum rate of SDLT here is 3%, but for PBSA it can be 1%, the lowest SDLT rate for any asset class.

With the UK no longer a member of the EU, the UK can treat EU and other non-UK nationals differently. For SDLT, a 2% surcharge now applies to non-residents and certain UK companies owned by non-UK residents. However, this surcharge does not apply to PBSA.

PBSA also enjoys a privileged capital gains tax (CGT) treatment. The normal CGT rate for residential property is 28%. However, PBSA is treated as non-residential if certain conditions are met, and the CGT rate is 20%.

To qualify the PBSA, the building must:

  • have at least 15 bedrooms;
  • be purpose-built or converted for occupation by students and
  • be occupied by students on at least 165 days.

Another favourable tax treatment is Inheritance Tax (IHT). A non-UK domiciled individual is usually subject to IHT only on their UK assets. By holding UK assets in a non-UK company, a non-dom can normally escape IHT. This is no longer the case for UK residential property: however a residential property is wrapped up, the non-dom will be within the scope of IHT in respect of it.

The good news is that PBSA is not counted as residential property for this purpose. The definition is the same as the one used for CGT.

When structuring PBSA acquisitions, investors have to choose whether to invest personally, through a ‘tax transparent vehicle’ such as a partnership or LLP, or through a company. This is beyond the scope of this report, but the choice follows much the same pattern as for general residential investments and you can find more information below and in our previous article here. For the most up-to-date guidance, please contact us.

If a company is to be used, the investor must decide whether it should be a UK or non-UK company. Although historically there have been considerable advantages in buying UK property in a non-UK company, these have been largely whittled away by successive changes in legislation, so non-residents are subject to UK CGT in much the same way as UK residents. As noted above there can still be an IHT benefit, and some other limited benefits remain.

Outlined below are a number of legal issues and considerations that UK investors and developers of PBSA need to be aware of:

  1. Planning and zoning regulations: PBSA developers and investors need to ensure that their project complies with the local planning and zoning regulations. They should also consider any potential objections from local residents and ensure that their project is socially responsible.
  2. Building regulations: PBSA developers and investors need to comply with national building regulations, including health and safety regulations, fire safety regulations, accessibility requirements, and energy efficiency standards.
  3. Leasehold and freehold agreements: PBSA developers and investors should ensure that they have the right to leasehold or freehold the land that they are developing on, and ensure that they have a valid legal agreement in place.
  4. Contracts and agreements: Developers and investors should ensure that they have contracts and agreements in place with all relevant stakeholders, including contractors, architects, and letting agents. These agreements should clearly outline the terms of the partnership, including the development plan, budget, timelines, and payment terms.
  5. Tenant laws and regulations: PBSA developers and investors need to adhere to tenant laws and regulations, including the rules around deposit protection, tenancy agreements, and eviction procedures.
  6. Tax laws: Investors should ensure that they understand and comply with UK tax laws, including stamp duty land tax, capital gains tax, and corporation tax.
  7. Environmental laws: Developers should consider the environmental impact of their project and ensure that they comply with relevant environmental laws and regulations, including waste management and sustainability standards.
  8. Data protection laws: Developers and investors should follow data protection laws and ensure that they collect, store and process tenant data in a compliant manner.
  9. Insurances: Developers should ensure that they have the right insurance policies in place, such as public liability and professional indemnity insurance, to protect themselves and their assets.

Overall, UK investors and developers of PBSA need to navigate complex legal and regulatory frameworks to ensure that their projects are successful and compliant. You should seek legal advice and guidance to ensure that you understand all of the legal issues and considerations that apply to your project.

The information on this page is intended for guidance only. It is based upon our understanding of current legislation and is correct at the time of writing. No liability is accepted by Berg Kaprow Lewis LLP for actions taken in reliance upon the information given and it is recommended that appropriate professional advice should be taken.

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Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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