Print friendly version 15 May 2008

OFT to investigate sale and rent back

The Office of Fair Trading (OFT) has launched a market study into the sale and rent back sector.

Sale and rent back arrangements (also known as sale and leaseback) involve individual homeowners selling their property, usually for less than the market value, in return for the option to remain in the house as a tenant. These arrangements are typically taken up by homeowners in financial difficulty.

The OFT said it intends to take a detailed look at the characteristics of sale and rent back products and whether existing consumer protection legislation is sufficient and effective.

David Salusbury, chairman of the National Landlords Association, said that the current financial climate is likely to increase interest in the sector. "Sale and rent back is relatively new but is set to grow considerably over the next 12 months. With a tighter economic climate, there is bound to be more interest from homeowners who are struggling to keep up with their mortgage repayments and are looking to stave off repossession," he said.

The cash obtained from the sale of the property in such situations is usually used to clear the homeowner’s mortgage.

Michael Coogan, director general of the Council of Mortgage Lenders, said: “The reality is that sale and leaseback companies are already targeting homeowners in difficulty. The quicker we have effective regulation of the sector to provide protection for consumers, the better the safety net for borrowers in financial difficulty will be.”

Peter Tutton, debt policy officer at Citizens Advice, added that anyone in mortgage arrears or threatened with possession action should get independent advice on all their options before resorting to sale and rent back. "An experienced adviser can help negotiate with the lender and the court on making a sustainable repayment offer that may allow the owner to stay in their home.”

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