Sell and rent back, or sale and rent back, refers to schemes where property owners could sell their home to a company and then rent it back from them. Sell and rent back was often an attractive option for people who had money problems and were struggling to meet their mortgage payments, as it helped free up financial constraints, yet still enabled them to stay in their much-loved homes. Well, that was the theory at least.
Following concerns and an investigation by the Financial Services Authority (FCA) in 2012, sell and rent back schemes are now largely unavailable in the UK. Any companies that do offer a sale and rent back service must legally be registered with and monitored by the FCA.
Here at Molae Properties we’re not regulated to offer sell and rent back schemes and neither do we act as an intermediary.
The idea behind sell and rent back schemes was that a company or private property investor would buy your home for a discounted price on the basis that you would then rent it back from them as a paying tenant.
In theory, it’s a good solution to a problem, but in reality there were a host of issues that could go wrong and scams that could take place.
Some of the common problems that the Financial Standards Agency identified with sale and rent back schemes were:
1. Homeowners not being given enough time to properly consider the agreement before being pressured to sign.
2. The sale and rent back agreements weren’t fully disclosing all the facts to the customers.
3. Incorrect information being supplied in tenancy agreements, so they didn’t meet FSA standards.
4. Sale and rent back companies not properly assessing people’s individual circumstances.
5. Some sale and rent back companies using the method as a way to target vulnerable people and acquire property for their portfolios.
6. Inappropriate advertising and targeting of homeowners.
There were also frauds and scams associated with sale and rent back. These included:
a. False promises made regarding tenancy and the ability to remain in the property and short tenancy agreements being given. Rather than having tenancy agreements being renewed as promised, the customers subsequently found themselves being evicted.
b. Changing the agreed purchase prices close to signing, so customers ended up with less for the property than they’d expected.
c. Rental payments being higher than the original mortgage repayments, making the property too expensive to stay in as a renter.
Here’s a brief history of sale and rent back schemes and an insight into when changes were made:
2007 TheCouncil of Mortgage Lenders first raised concerns about sale and rent back schemes. Their main concerns centred around the way homeowners were being approached and the way sale and rent back companies were operating.
2008 – The UK government asked the Office of Fair Trading (OFT) to formally investigate the sale and rent back
2010 – By 2010, the sale and rent back scheme had become regulated. All companies operating sell and rent back options had to be authorized by the FSA and follow strict rules and regulations.
2012 – Despite the strict rules, continued failings and problems were reported with sell and rent back schemes. So the sale and rent back market was stopped.
2020 and beyond – The sell and rent back market does still exist, but barely. Very few companies in the UK now offer the service and any companies that do have to be authorized by the FSA. Any companies that aren’t FSA authorized are operating illegally and should be avoided.
Molae Properties are not regulated to offer sell and rent back schemes or to act as an intermediary.
However, if you are looking to sell your house quickly and are interested in alternative solutions, do contact us. Depending on your personal circumstances, we may well have options available for you. Contact us today on 020 3368 3331 or fill in our contact form.
With higher interest rates and the effects of the credit crunch, homeowners face a greater risk of repossession than they behave been since the 1990s.
According to the Royal Institution of Chartered Surveyors (RICS), around 45,000 homes will be repossessed in the coming year – this equates to 123 repossessions every day.
This represents a 50% increase on the repossession rate in 2007. Read More
Should you sell and rent back?
With increasing numbers of homeowners facing problems keeping up with mortgage payments, sell and rent back solutions are becoming more and more popular.Read More
Sub-prime mortgages are set for strong growth in the UK over the next four years, according to market analyst Datamonitor.
Datamonitor predicts that the market for this type of mortgage will be worth £31.5bn by 2011, compared to £24.6bn in 2006. Read More
Increasing numbers of wealthy older people are choosing to sell their homes and rent them back. Letting agents report that they are seeing more over-50s choosing this option.
The desire to free up cash to enjoy life is one of the reasons for this trend of selling to rent, or the fact that children have left home and the house is too big. In addition, many want to avoid the prospect of avoiding leaving their families with a large inheritance tax bill.Read More
According to research from Key Retirement Solutions has revealed that a quarter of homeowners over the age of 60 still have outstanding mortgage debt.
The research showed that retired people, or those close to retirement who had not yet paid off their mortgage owed an average of £31,000 each.Read More
The sale of my property was well managed with regular communication and advice and support provided throughout the process. The company also provided legal support through one of their panel solicitors which was professional friendly and reassuring during what was a complex sale. They are trustworthy and reliable and I would recommend this company to anyone looking to sell their property. Thank you for making this a much easier process.
R. Mangal, Leyton, London, E10