Regulation brought in for sale and rent back
Sale and rent back schemes have been at the centre of controversy over the past couple of years. Since the onset of the global credit crunch, and with property prices falling, an increasing number of people have turned to these sale and rent back firms in order to avoid losing their homes altogether through repossession.
The idea behind the scheme is that the sale and rent back firm buys the property from the struggling homeowners and then rents it back to them.
However, the controversy erupted over a number of issues, the first being allegations that many sale and rent back firms were not paying homeowners a fair price for their properties.
The other matter that caused controversy was that the sale and rent back firms were often failing to keep their promises with regards to allowing the former homeowner to stay on as a tenant, and were finding ways to get them out of the property rather than letting them stay on as tenants indefinitely.
However, campaigners have welcomed the recent news that as of the start of next month sale and rent back schemes are to be regulated by the UK’s financial regulator, the Financial Services Authority.
Officials from the FSA have said that they aim to ensure that consumers are treated fairly by sale and rent back companies, as many of those that signed up to these scheme did not really know what they were getting themselves into.
One FSA spokesperson said: “We know that some consumers enter into sale and rent back arrangements without understanding the costs and risks involved. This can be a source of real distress for people in already difficult circumstances. Firms entering our regime will need to run their business in a way that means customers are treated fairly.”
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Now that the sell and rent back regulation has started it is expected that less than 10 companies will apply for regulation. This market was dominated by individual investors but the FSA regulation is so strict that only the big companies with massive resources could apply. I guess the regulation has achieved its aim of cleaning this market of the cowboys.
The FSA regulation of sell and rent back is the best thing that ever happened to this market. We have been in this market for a long time and agree that it badly needed the interference of the government.