Government proposals to offer some institutions "time-limited" degree-awarding powers may be illegal and could spark litigation from students, higher education college heads have warned.
The government's consultation document on new rules for the university title and degree-awarding powers suggests that these powers would be reviewed every six years.
Institutions that failed to get their powers renewed could lose their entitlement to call themselves a university.
The rules would apply only to institutions gaining a university title under the new rules. Existing universities are checked for quality but their titles are not jeopardised.
Lawyers have told the Standing Conference of Principals that the proposals could expose the Privy Council to judicial review and institutions to legal action from students.
In its response to the consultation, Scop says it has "very grave concerns about both the wisdom and the equity" of introducing time-limited powers.
Legal advisors have said that methods used by the Quality Assurance Agency for institutional audit are unlikely to be appropriate to back up a decision by the Privy Council to renew or remove degree-awarding powers.
The government would have to publish separate procedures and criteria to avoid a legal challenge over this issue.
Institutions and the Privy Council could find themselves in hot water over the rights of students whose degrees could be invalidated or downgraded if their institution suddenly lost degree-awarding powers.
Scop warns: "Our understanding, on the basis of legal advice we have received, is that if students' interests are not or cannot be protected in this way, in addition to a possible case for breach of contract against the institution concerned, the Privy Council, as the regulatory authority, might also be exposed to a possible judicial review for breach of legitimate expectation."
Arrangements would have to be put in place to ensure that the students could at least complete their studies so they could obtain a degree, Scop says.
But it adds: "It cannot be assumed that, in the event of non-renewal of taught degree-awarding powers, another institution with degree-awarding powers would willingly take on responsibility for the students.
"Likewise, it cannot be assumed that a student who has registered for a named award with a particular, possibly specialist, institution would willingly settle for certification from another institution."
College heads are also concerned that any uncertainty over an institution's powers to award a degree would have a negative impact on student recruitment.
Scop wants the government to "revisit" the proposals, which it argues "do not sit well with the stated intention to give parity of esteem to teaching-led institutions through enabling them to apply for university title".
A spokeswoman for the Department for Education and Skills said: "We believe the process should be sufficiently robust to withstand legal challenge."
She added that the interests and rights of students would be of utmost importance.