FSA begins regulation of sale-and-rent-back firms

Permalink: FSA begins regulation of sale-and-rent-back firms
by Gill Montia

The Financial Services Authority (FSA) is introducing new measures to regulate sale-and-rent-back companies, from 1st July.

The move forms the first stage towards full regulation of the sector, which has become notorious for rogue operators.

From next month, homeowners who are aggrieved over their treatment by sale-and-rent-back firms will be able to complain to the Financial Ombudsman Service and by the end of June next year, additional measures will be in place to protect property owners who frequently opt for sale-and-rent-back when under threat of repossession.

Concern over sale-and-rent-back operators has been growing since the onset of the housing market downturn.

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 gives a 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 and the sector is also notorious for charging exorbitant fees.

From July, firms will have to apply for permission from the FSA to continue trading and be able to prove that they comply with the FSA’s principles

The regulator’s head of mortgage policy, Ed Harley, comments: “Firms entering our regime will need to run their business in a way that means customers are treated fairly. This includes making clear to customers important details, such as the length of time they can stay in the property, before they enter into the arrangement.”