OFT investigates sale-and-rent-back

Permalink: OFT investigates sale-and-rent-back
by Gill Montia

The Office of Fair Trading (OFT) is undertaking a market study of the fast-growing sale-and-rent-back sector, amid concerns that vulnerable homeowners are being exploited.

Sale-and-rent-back firms buy property at a discount and in return give the previous owner the option to remain in the house as a tenant.

The arrangement often appeals to people in financial difficulty or to those facing repossession and the OFT says it is taking action now because of the current economic climate.

The study will investigate the characteristics of the sale-and-rent-back product in the light of existing consumer protection legislation. It will then consider whether this protection is sufficient and effective.

The OFT’s chief executive, John Fingleton, is aware that sale-and-rent-back schemes can be helpful for some consumers but wants to ensure that homeowners in difficult circumstances make well informed choices.

Many sale-and-rent-back firms offer around 80% of a property’s value although there have been reports of properties being acquired for around 60% of their market price.

The Citizen’s Advice Bureau, Council of Mortgage Lenders and homeless charity, Shelter, have all called for regulation of the sector because many of those agreeing to sale-and-rent-back deals are not aware that in return for selling their homes at a discount, they only receive a typical six to 12-month assured leasehold tenancy.

Their landlord may choose not to renew this and in addition, the property can be repossessed if the landlord cannot keep up repayments on the mortgage.

The OFT study should be completed in September of this year.