Treasury launches sale-and-rent-back consultation

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by Gill Montia

The Treasury has launched a consultation aimed at establishing a regulatory framework for the fast-growing sale-and-rent-back sector.

The move follows an Office of Fair Trading’s (OFT) report on the industry, published last month, which outlined key areas for regulation, including a requirement that firms operating in the sector make potential customers aware they can obtain free, independent advice on any sale-and-rent-back deal.

With repossessions set to rise, the schemes, which allow homeowners to sell their properties and remain in them as tenants, could become increasingly attractive to households struggling with mortgage arrears.

Around 50,000 transactions are thought to have taken place in the UK so far and according to the OFT report, serious concerns have been raised about some of the 2,000 operators in the market.

Homeowners-cum-tenants have in some cases sold their properties at huge discounts and been charged exorbitant fees.

They have then been offered assured shorthold tenancies which give their landlords the right to serve notice to quit after just six months.

Once the Treasury has decided how best to regulate the industry the Financial Services Authority will be responsible for enforcement.