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Student accomodation contracts: striking the balance

  • United Kingdom
  • Real estate

14-11-2018

Eversheds Sutherland property column: November 2018

Accommodation is at the heart of the student experience and getting student accommodation contracts right is essential for all accommodation providers. Student expectations have never been higher, and in an increasingly competitive and consumer-driven market, such contracts need to strike a balance between the interests and expectations of the student and those of the provider.

Tenancy or license?

A fundamental question which all providers of student accommodation must consider is whether to grant tenancies or licences to their student occupiers.

For educational institutions providing accommodation this is usually a straightforward decision, with licences offering a number of practical and legal advantages over tenancies. In a halls of residence environment, where it may be necessary to relocate students to alternative rooms, a licence offers flexibility. It can also provide for students to be temporarily suspended from accommodation in certain circumstances, for example, where investigations into allegations of sexual misconduct are ongoing. In contrast, where a tenancy is in place, the student will have an exclusive right to occupy their specific accommodation, be it a room or flat, and moving or suspending a student from the accommodation in such circumstances will be more difficult.

For private providers of accommodation, the question of whether to grant a tenancy or a licence is less straightforward. The position under paragraph 8 of Schedule 1 to the Housing Act 1988 (HA 1988) is that a private provider of student accommodation will need to be authorised by the Secretary of State to enter into contracts which are not assured tenancies with students. A provider who has not been authorised must grant assured tenancies which, by their very nature, afford students greater rights.

There are, of course, key differences between the positions and interests of institutions and private providers when entering into accommodation contracts. Private providers are, generally speaking, more likely to take a purely commercial view of such contracts and may be less concerned with whether a student is continuing a course of study or the impact of academic procedures and sanctions on the accommodation contract. However, with institutions increasingly out-sourcing the provision of student accommodation to private providers, there will be a significant number of private providers for whom the issues which affect institutions may be equally relevant. As a result of this, many private providers seek authorisation to grant licences under paragraph 8 of Schedule 1 to the HA 1988, rather than having to grant assured tenancies.

It is worth noting that the Renting Homes (Wales) Act 2016 (RHWA 2016) will have a significant impact on the type of accommodation contracts used for properties in Wales. When this Act comes into force, both institutions and private providers alike will be required to grant "standard contracts" which comply with the requirements of the RHWA 2016. There is no carve-out for providers of student accommodation to recognise the idiosyncrasies of these sorts of arrangements.

The impact of consumer law and the student contract

Changes in the UK's consumer law framework, together with increased scrutiny of consumer law compliance within the education sector generally, mean that providers must take care to ensure that their student accommodation contracts are fully compliant. Failure to meet the requirements of consumer law leaves providers exposed to substantial risks of complaints, claims, reputational damage and even criminal liability. Terms that contravene consumer law may also be challenged as ineffective, leaving a provider unable to rely on them.

Consumer law requires that the terms of student accommodation contracts be "transparent", in "plain and intelligible language" and "legible". In particular, terms dealing with sums (including the accommodation fees and any other charges made under the contract), must be "transparent" and "prominent". If they are not, there is a real risk they will be assessed for fairness.

All the terms of an accommodation contract should be properly incorporated at the point the contract is formed. Even where the contract contains a variation clause, it can be difficult to make variations once it has been entered into. The various policies and procedures under which complaints, misconduct and other breaches will be dealt with must be clear, fair and properly incorporated. Where such policies and procedures also form part of the student contract (being the contract the student enters into with the relevant institution for the purposes of their course of study), they must still be specified in the accommodation contract itself, with working links provided. Institutions should ensure that their policies and procedures align with their accommodation contracts, in particular in relation to the application of student regulations and what happens if a student ceases to be registered on a course of study.

The respective rights and obligations of the student and the provider must be set out clearly in the accommodation contract. The provider's powers to impose sanctions or to take actions such as relocation, suspension or termination must be clear, fair and robust. Sanctions must be proportionate to the nature and gravity of the breach. Particular care should be taken when seeking to impose sanctions on students collectively where the specific culprits of an offence (for example, damage to the accommodation) cannot be identified, as such sanctions may be challenged on the grounds of unfairness.

A balancing set

Student accommodation contracts can be complex as they require a careful balance of property, consumer and student law principles. The consumer law landscape in particular is ever-evolving. Providers of student accommodation should therefore ensure that they keep their terms and conditions under regular review, to avoid upsetting the balance and having to face the legal and reputational consequences.