Sale And Rent Back Schemes To Be Investigated By OFT


Posted on: 10 March 2020 by Lewis May

Sale And Rent Back Schemes To Be Investigated By OFT

Defaults of mortgage repayments have been rocketing over recent months, with many families facing severe financial hardship. With rising energy bills, soaring petrol prices, increased food prices, high borrowing costs, tighter quick loan UK conditions, and below inflation wage rises, many families cannot make ends meet each month, and for many this is resulting in missed mortgage repayments. Of course, this could eventually end in repossession, and many families have become desperate to find a way to keep the roof over their heads.

This is why a number of households have turned to sale and rent back schemes, which in theory sound like an effective solution. These firms purchase the home from the homeowner and then rent it back to them, often offering to rent it back on a permanent basis providing the tenancy agreement is adhered to. For the former homeowner this means no risk of repossession and no need to uproot the family and move on, although they will of course no longer be homeowners.

However, campaigners and officials have raised grave concerns over a number of flaws with many sale and rent back schemes, which results in the consumer being treated unfairly.

Firstly, many officials claim that sale and rent back firms offer a price that is way below the market value of the property, which means that the homeowner gets very little when they sell the home.

Secondly, there are also concerns that some sale and rent back firms promise the homeowner that they will be able to rent back the property indefinitely but then fail to keep to that promise, which means that not only does the former homeowner get a very unfair price for the home, but is also left to find somewhere else to live.

These concerns have now resulted in the Office of Fair Trading launching a probe into these schemes, following calls from a number of officials and agencies to do so. One official from a homeless charity, Shelter, said: ‘This study is urgently needed, and comes on the back of vulnerable people losing their homes to some dishonest sale and leaseback companies.’

He also said: ‘These companies encourage hard-up homeowners to sign up for what is plainly a very bad deal. Shelter has seen cases where homeowners have not only lost out financially after selling their homes to an sale and leaseback company, but also lack any right to permanently stay in their home and ultimately find themselves homeless. Shelter has called on the Government for regulation in this growing sector, and we hope the OFT study will offer the public improved protection against the hidden dangers of some schemes and ensure all sale and leaseback companies operate in the best interests of consumers.’

An OFT official added: ‘Sale and rent back schemes might be helpful for some consumers but there are a number of potential concerns including whether consumers in difficult circumstances are making well informed choices. We are therefore prioritising this work to take a good look at whether consumers are adequately informed and protected.’

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Lewis May

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