FSA now regulates sale-and-rent-back

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by Gill Montia

Firms operating in the UK sale-and-rent-back sector now come under Financial Services Authority (FSA) regulation.

As of 1st July companies have four weeks to apply for permission to continue their business activities.

Successful applicants will be granted interim permission if they can demonstrate they are “fit and proper” persons and can meet certain minimum standards.

They will also need to have developed a viable business plan, paying attention to current and future funding strategies.

People considering selling their homes to a sale-and-rent-back enterprise can now demand an independent valuation and new transparency requirements mean that consumers must be fully aware of the level of discount being offered.

Homeowners who are aggrieved over their treatment by sale-and-rent-back are free to complain to the Financial Ombudsman Service.

The industry has flourished during the credit crisis and become notorious for rogue operators who prey on people under threat of repossession.

Companies have been accused of paying well below market prices for the homes of financially distressed people who are then under the impression that they can continue to live at the property as tenants for as long as they choose.

However, many are offered assured shorthold tenancies which give landlords the right to serve notice to quit after just six months.

Property-owner-cum-tenants also stand the risk of being evicted if the new owner defaults on mortgage payments.

Finally, the sector is notorious for charging exorbitant fees.

Full FSA regulation will come into force on 30th June 2010.