Following a policy change ending the private sector status of further education colleges, there could be wide-reaching implications for their property estates according to specialists at Lambert Smith Hampton (LSH).

This shift in colleges’ status from private sector bodies to public sector entities means they are now subject to a new set of financial controls and borrowing regulations.

Following the Skills and Post Education Act 2022 Review for Colleges, the DfE’s (Department for Education) has reclassified colleges so that they now fall under government control.

This change could result in surplus land sale proceeds being redistributed by the DfE to colleges with greater needs. The classification shift is a direct consequence of the Skills and Post 16 Education Act 2022, which is retrospective, taking effect from 1 April 1993 for Further Education Colleges (FECs) and Designated Institutions (DIs), and from 1 April 2012 for Sixth Form Colleges (SFCCs). The next review date is March 2025, which may result in the DfE taking further steps to take control of college proceeds.

Colleges may no longer be able to keep the proceeds from selling surplus land. Instead, these funds may be redistributed by the DfE to colleges with greater need, which may not be the college that sold the land. The potential change has financial implications for colleges that currently have surplus or underutilised land.

Mark Wilkinson, head of development consultancy at LSH, said: “For many colleges, their recent growth and survival has been contingent on prudent use of their real estate assets. Some have been able to fund expansion via their balance sheets, while others have benefitted from third-party rental revenue or the sale of surplus land. This new policy threatens to effectively remove this autonomy and place their futures back in the hands of the DfE”.

“With the threat increased government oversight and potential financial challenges to colleges, we would recommend expediting the sale of surplus land before the approaching review in March 2025 in order to retain their proceeds of sale”.