Sale and rent back regulations 2010

The measures have been introduced to protect vulnerable homeowners from sale and rent back schemes which typically involve a homeowner selling their house at a discounted rate and continuing to rent their property under an assured tenancy from the firm they sold it to.

Often tempting arrangements for homeowners who are struggling with debt, sale and rent back schemes can be misleading, and leave people with more debt than they started with. During the recession many unauthorised firms have been buying houses at much lower prices than the market value and offering consumers no protection over their home ownership.

New measures will stop firms from using high pressure sales techniques, including cold calling and posting leaflets through letterboxes. As well as ruling on distribution of literature, the content of promotional advertising has also come under the spotlight and phrases such as ´fast sale´ and ´mortgage rescue´ have been disallowed.

The measures have been introduced to protect consumers, and a comprehensive new proposal is to be implemented and monitored by the FSA to include a required ´cooling off period´ which ensures customers are not rushed or pressured into a decision they will later regret. Firms will also be obliged to check the scheme they are offering is affordable to an applicant before signing them up.
 
The main aim of the new rules and regulations regarding sale and rent back market is to make sure consumers have enough information to make an informed decision before entering into serious arrangements affecting their home, and to ensure consumers are not mis-sold products that are unsuitable and unaffordable.

The Treasury first announced that sale and rent back firms would be regulated by the FSA in June, 2009, to address growing concerns over the lack of protection of homeowners, major changes will not come into effect until June, 2010. Any firms not complying with the new regulations will face fines or imprisonment.

The Financial Service Authority, which regulates the financial services industry, aims to help the UK consumer get a ‘fair deal’ by promoting the public understanding of the financial system and regulating consumer protection.
In general, sell to rent schemes mean homeowners are paid less than the market value for their home, and are then allowed to stay in the property for a much shorter period under a tenancy agreement. The homeowner is often only offered a tenancy of between 6 and 12 months, which is not long enough for most consumers to pay back their scheme.

If you are considering a sale and rent back scheme, the FSA has recommended that all homeowners only use authorised companies, and that they fully understand the risks attached to the scheme before entering into any agreement.
If you are struggling financially with debt problems, then there could be many other debt options available to you than entering a sale and rent back scheme, thus risking your home. A regulated debt management company in the UK will be able to give debt help and advice free of charge about Individual Voluntary Arrangements (IVAs), Debt Management Plans (DMPs) and a range of debt solutions and options which may suit your needs and requirements.