Over the last few years we have witnessed the significant rise of institutional interest in the Purpose Built Student Accommodation (PBSA) sector. The latest market data shows that over £15bn has been invested in the UK PBSA market during that period.

Primary reasons for this growth cited by investors include: the stability of demand from students for high quality accommodation (especially from overseas students, who represent a significant proportion of the tenants); the strong performance of this sector relative to other commercial property investments; the fact that demand has proven inelastic to higher fees; the 'scalability' of the business; and the security of the income.

In response to this demand, we have built a large student sector team at Mishcon de Reya. The team includes specialists from across the business focusing on real estate, tax, corporate structuring, acquisition, management, development funding and debt funding and has transacted over £2bn of deals during the last two years.

As part of this process we have developed an extensive knowledge of the challenges that face operators of PBSA. Whilst many of these challenges are similar to investing in other sectors, there are certain areas where specialist legal advice can prove to be invaluable.

These include: the complex and often misinterpreted regulations relating to Houses in Multiple Occupation (HMOs); the application of Multiple Dwellings Relief (MDR); the drafting and interpretation of Nomination Agreements with the universities; management contracts with operators and development funding in a sector where achieving PC before the start of the academic year is so critical to the operation of the business. All of these issues have the potential to trip up the unwary investor or to damage the value of their investment if not properly advised.

The sector will not be without its challenges going forward in an ever changing political landscape where the costs of being a student are often scrutinised. Other factors include the potential impact on demand as a result of Brexit and as a result of new costs to landlords operating PBSA assets (for example an increase in the cost of HMO licences in England & Wales to reflect the already increased costs in the Scottish market).

Notwithstanding these challenges, interest in the sector remains very strong, with a number of large portfolios due to come to the market in the next two quarters of 2018. It is therefore likely that PBSA will continue to be a popular 'alternative' investment and will feature heavily in institutional investment portfolios.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.