Sale-and-rent-back a disaster waiting to happen

The Citizens’ Advice Bureau (CAB) is once again raising concerns about sale-and-rent-back property schemes, which it believes are “a disaster waiting to happen”.

Pressure on personal finances has led to a proliferation of companies offering to buy properties and rent them back to the original owners.

However, lack of regulation in the sector is resulting in people at risk of repossession selling their homes for less than 60% of the market value, whilst unaware that their continued occupation of the property is not guaranteed.

Once they become tenants their right to occupancy extends only to the standard six to 12-month rental period.

Sale-and-rent-back is not regulated by the Financial Services Authority (FSA) and Peter Tutton of the CAB believes that many of the people embarking on this kind of transactions as a solution to their financial difficulties are vulnerable.

The number of companies operating in the sector has increased dramatically in the past 18 months, with advertisements appearing in local and national press as well as online.

The majority offer no rental guarantees beyond a standard Assured Shorthold Tenancy.

The equity release industry, which is regulated by the FSA, has also raised concerns about sale-and-rent-back as it believes that pensioners and the very elderly could fall victim to unscrupulous operators.

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