Debt Advice Help and Support

Sale-and-rent back market scrutinised

Written by on 19 October, 2009

Sale-and-rent back firms using exploitive advertising and high-pressure sales techniques will come under the spotlight, after a new package of measures was released by The Financial Services Authority (FSA).

The measures, aimed at the sale-and-rent back (SRB) market, will come into effect in June 2010 in order to protect vulnerable homeowners. Sale-and-rent back schemes typically involve a homeowner selling their house at a discounted rate, then continuing to rent the property under an assured short hold tenancy.

Sale-and-rent back schemes are often a tempting arrangement for homeowners struggling with debt, especially within the current economic climate which has seen interest rates grow. The sale-and-rent back market has been riddled with un-authorised firms buying houses dramatically lower than what they are worth, often offering consumers no protection over their home ownership.

These new measures will prohibit firms from using many high-pressure techniques including cold calling and leaving leaflets in letterboxes. As well as ruling on distribution of literature, the content within promotional advertising has also come under scrutiny, with words such as ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ being banned.

A comprehensive new proposal to be implemented and monitored by the FSA also includes a required ‘cooling off period’ to ensure consumers do not make a rushed decision on the process and requirements such as the firm being obliged to check the scheme is affordable for the applicant.

The aims of the new regime governing the sale-and-rent back market is to make sure consumers have the adequate information to make informed decisions on entering into these serious arrangements, to ensure consumers are sold products which are suitable for their financial situation, and give them the protection needed.

It was first announced by the treasury that SRB firms would be regulated by the FSA in June 2009 to address concerns over protecting vulnerable homeowners. Although these changes will not come into effect until 30 June 2010, Sale-and-rent-back firms will be governed by the FSAs Principles for Businesses. All sale-and-rent back firms not complying with the regime face fines or imprisonment.

The Financial Service Authority, who 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.

Typically, these schemes mean homeowners are paid less than the market price for their home, and their new tenancy is offered for a much shorter period. The homeowner is often offered a tenancy of 6 to 12 months, which unfortunately for many consumers, is not long enough to pay back their scheme.

If you are a homeowner considering using a sale-and-rent back firm, the FSA recommends you ensure only authorised companies are used and to make sure all risks of the scheme is understood before entering into an arrangement.

Anyone struggling financially with debt problems should seek information on all the debt solutions potentially available to them before deciding on what avenue to explore. There may be many other debt solutions available to help struggling consumers such as debt consolidation, debt management plans or an IVA, which do not usually involve a consumer having to sell or lose their home.

Useful links: IVA

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