CALLS for the controversial sale-and-rent-back market to be regulated have intensified after the Office of Fair Trading announced an investigation into the sector.
Sale-and-rent-back schemes typically involve a company buying a home at a discount – usually 20 per cent or more – in return for allowing the occupiers to continue living there. In the process, the homeowners become tenants and have to pay full rent
to the new owner. But few schemes provide any long-term security of tenure, meaning that tenants are forced to leave in the event of rent increases, a further sale of the house or a repossession arising from the provider/owner going out of business.
A sharp rise in the number of homeowners opting for sale-and-rent-back in recent months, as tighter credit conditions raise the spectre of repossession for more households, has sparked fears of misinformation and mis-selling in the sector.
"These companies encourage hard-up homeowners to sign up for what is plainly a very bad deal," said Archie Stoddart, director of Shelter Scotland. "Shelter has seen cases where homeowners have not only lost out financially after selling their homes to a sale-and-leaseback company, but also lack any right to stay permanently in their homes and ultimately find themselves homeless."
The OFT said it would consider whether consumers were making well-informed decisions and look at how well protected they are by existing legislation. Its report is due in September.
But Andrea Rozario, director general of equity release trade body SHIP, called for full regulation of sale-and-rent-back schemes. "Given the increasing numbers of people facing big debt problems, in many cases including the full repossession of their home, it is vital that the government takes very urgent action before larger numbers of people fall for the apparent 'quick fix' of sale-and-rent-back without appreciating the risks," said Rozario.
"When these people realise they have jumped from the frying pan into the fire, it will be too late."
The full article contains 346 words and appears in The Scotsman newspaper.
