Rent Guarantee Schemes for Students

As a result, higher education institutions are looking at ways they can assist their students in the private rental market.

One possible option is for a university to guarantee student rent. However, whilst rent guarantee schemes are of obvious benefit to students, they do present a financial risk to universities. Insurance-backed schemes are now starting to emerge which may help to meet student needs whilst also protecting the university's financial liabilities.

What Should You Consider Before Offering a Rent Guarantee Scheme?

• Make sure the university is permitted to enter into a rent guarantee scheme and that if falls within its objects and powers.
  
  Any restrictions - whether under the university's charter, instrument and articles of government or otherwise - should be considered carefully, along with general charity law provisions where applicable.
  
  
• Ensure the university’s student eligibility criteria, along with the terms of tenancy agreements the university is asked to guarantee, align fully with any insurance policy terms that will apply if the landlord calls upon the rent guarantee.
  
  
• Consider the extent of the administrative burden on the university in running the scheme and that the accommodation services department has the necessary resources to absorb the additional work. 
  
  Whilst this could be outsourced to insurers, universities may prefer to run the scheme internally to ensure that students are dealt with fairly and reasonably.
  
  
• Guarantees must be made in writing and signed by the guarantor. 

For governance and risk control purposes, the university will need to ensure that any electronic signature platform chosen to facilitate guarantee signatures is secure and offers robust security features (for example logins, or PIN numbers). This will enable the university to demonstrate that the electronic signature provides an ‘authenticating intention’ and also provides a proper record of liabilities undertaken.

The aim of the scheme will be to create a streamlined procedure whereby students can apply for assistance through the provision of a guarantee, the eligibility criteria can be assessed and approved, and the guarantee then issued to the landlord. Financial risk criteria such as maximum guarantee amounts should be factored in.

To Outsource or Not to Outsource?

As mentioned above, the university will need to consider the extent to which it offers the arrangements as a direct service, or to outsource to third parties, including the insurer’s back office team.

If the work is outsourced, the university will need to ensure an appropriate service agreement is in place which clearly details the services that the third party will undertake, including in relation to its brokering of the insurance policy and its release of the guarantee agreement for signature. The university may consider making it a condition of the service agreement that any changes that the third party negotiates to the insurance policy are communicated to the university immediately, to allow the university to amend its agreements accordingly to minimise exposure.

The Benefits

The attraction of using an insurance product to mitigate the financial risk of offering rent guarantees is obvious. The challenge is to think through the standard policy terms devised by the insurer to ensure that the requirements of the scheme are deliverable and actually mitigate the anticipated risks. The smooth administration of a scheme is important for a higher education institution's relationship with its students and the local private rental sector.

With careful analysis of rent guarantee schemes on offer, and dialogue with insurers, student representatives and local landlords, universities are finding a way to offer significant assistance to their student body in a way that will enhance their reputation and their rankings in student satisfaction surveys.

For more information please contact a member of our Higher Education team, or complete the form below.