Lawyers warn on student housing investment schemes

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Student accommodation schemes could be falling foul of FCA collective investment scheme rules, lawyers have warned.

Law firms say they have seen a spike in enquiries about whether student accommodation investments constitute collective investment schemes after the FCA won a High Court case in February.

The regulator took legal action against a scheme offering investments in rice farms in Sierra Leone, and another offering investments in carbon credits. The court agreed with the FCA that the schemes were unauthorised collective investment schemes.

Operating or promoting a collective investment scheme without authorisation is a criminal offence.

DWF partner Richard Tall says: “Whether student accommodation investment is a collective investment scheme depends on how it is structured. Where units are owned by single investors, those are less likely to amount to collective investment schemes than developments or units that are managed as a whole or collectively.”

Pinsent Masons partner Michael Lewis says: “In the Sierra Leone case, investors bought a parcel of land that was cultivated individually. The court held that, in reality, the land was managed as a whole.

“In light of this, we have been contacted by those who have already set up schemes and are concerned they amount to a collective investment scheme.”

Money Marketing understands the Securities & Futures Commission of Hong Kong has written to a number of promoters of student accommodation schemes in the UK because the investments have been marketed to Hong Kong nationals.