Landmark ruling on sale-and-rent-back

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by Gill Montia

A couple who entered into a sale-and-rent back agreement have won a landmark ruling in Birmingham County Court.

In 2005, Paul and Amanda Jackson of Shrewsbury came to a sale-and-rent-back arrangement with a firm called Repossessions Stopped.

They had lived at their property for 20 years but fallen into mortgage arrears.

However, two years down the road they faced eviction because Repossessions Stopped failed to keep up mortgage payments on the home the Jacksons once owned but then occupied as tenants.

The couple believed the agreement meant they could stay in the property as tenants for life, which doubtless influenced their decision to agree a sale price £63,000, well below the market value of £100,000.

A county court judge has now ruled that their tenancy is for life and they can pay rent to the lender who has repossessed the property.

Furthermore, their children will be entitled to inherit the tenancy.

The case was brought on behalf of the Jacksons by Shelter.

The housing charity’s principal solicitor, John Gallagher, describes the ruling as a “huge and important victory for not only the Jackson family but everyone who is tempted by these sale-and-rent-back schemes”.

From 1st July, firms operating in the UK sale-and-rent-back sector came under Financial Services Authority (FSA) regulation.

For the time being operators have to be able to demonstrate that they are “fit and proper” persons and can meet certain minimum standards.

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