Beware Sale-and-rent-back companies

Permalink: Beware Sale-and-rent-back companies
by Kay Murchie

Sale-and-rent-back companies have been featured recently on programmes such as ITV1’s Tonight with Trevor McDonald and BBC1’s Watchdog. Such schemes have been labelled ‘a disaster waiting to happen’.

The amount of firms offering this scheme has increased rapidly over the last 18 months. Some of them are organisations offering certain guarantees. However, many are small businesses looking for rare bargain buy-to-let purchases. In addition, sale-and-rent-back schemes are not regulated by the Financial Services Authority (FSA).

The majority of sale-and-rent-back operators offer no rental guarantees beyond a standard Assured Shorthold Tenancy and former homeowners could be evicted within 6 months to a year.

A spokesperson for Safer Home Income Plans (Ship), the equity release industry body, highlighted that it is crucial that individuals are aware that sale-and-rent-back is not equity release.

The main difference is that sale-and-rent-back provides nearly no protection to consumers whereas the equity release industry provides complete protection. Furthermore, the equity release industry is fully regulated by the FSA.

The equity release industry has issued warnings about these companies amid fears that the elderly could fall victim to these corrupt schemes.

The Citizens Advice Bureau is urging for official regulation of firms that buy the homes of people at risk of repossession at knock down prices before renting them back.

Peter Tutton, of the Citizens Advice Bureau, said that vulnerable people trying to stay in their home are being lured into an industry that currently has no controls on it whatsoever.

Mr Tutton concluded that unless something is done to bring this industry into some kind of regulation, it is likely that an increasing amount of people will be losing lots of money and still losing their homes.