The sale-and-rent-back sector has come in for heavy criticism from the housing charity, Shelter, whose chief executive, Adam Sampson, has described some of the companies operating in the sector as “rip-off” merchants.
According to Mr Sampson, some sale-and-rent-back firms pay homeowners only half the market value of their property and do not honour promises that former homeowners can remain in their properties as tenants for life.
The sector has grown strongly in the past few years and is now estimated to be worth around £2.5 billion a year.
Shelter and other bodies involved in housing have been calling for it to be regulated, so that those selling their homes see a fair price (between 70% and 90% of the property value).
Shelter is also concerned that some people entering into a sale-and-rent-back agreements will not escape repossession.
Mr Sampson explains: “Some of these schemes are themselves financially unsustainable. We have had people whose homes are being repossessed because the people they sold them to couldn’t keep up with their payments.”
But Glenn Ackroyd of A Quick Sale has defended the industry. Speaking on Radio 4′s Money Box programme, he stated that the sector helps 20,000 people a year avoid repossession.
The National Landlords’ Association is currently drawing up a voluntary Code of Practice for the industry, which will come into effect in April.