Sale and Rent Back Uncovered

When times get tough, people get tougher. The City grows savage, companies turn cut throat and dogs start eating dogs. Well perhaps the economic crisis hasn’t quite filtered down to the canine world yet, but seeing as a poll found one in ten children were stressed about money, it could just be a matter of time.

 Amongst all the vicious thrashing about to stay alive in the market, a multitude of unscrupulous endeavours have sprung up and regulators are now hungry to clamp down on them. Fingers are pointing, fines are flying about and allegations of fraud are being issued whilst sideliners bleat about the need for transparency.

One sector to have come under attack would be the sale and rent back industry. “Vultures!” They’ve been branded by charity Shelter. Painted as predators trapping vulnerable, debt ridden homeowners with promises and short term relief, horror stories concerning the deals have begun to appear in the press. But are we really seeing the whole story? Or are a suspect few shaming an otherwise honest service?

Sale and rent back schemes work by offering to buy hard-up people’s homes and then renting them back to them. It’s seen as a quick form of debt relief and a way out of expensive home repayments, as the rent is often much cheaper. The upside is that families can remain in their homes, deals can be arranged rapidly and it can stop repossession.

However, horror stories have involved these companies buying homes for as little as 20% of the market value and forcing people out after a matter of months.

Estimates say that 2,000 firms offering sale and rent back deals have emerged in the last three years and up to 20,000 people have sold their homes to them. Surprisingly, this sector has been going uncontrolled and after a spate of negative press, the Office of Fair Trading (OFT) has called for it to be regulated by the Financial Services Authority (FSA).

Identifying that there is “potential for severe detriment to homeowners”, the OFT has recommended that compulsory regulation is implemented, along with increasing consumer awareness and improving information about housing benefits to weed out the crooked operators from the legitimate ones.

Those within the sale and rent back industry are dismayed to find their reputation tarnished by rogue “vultures”. Chairman of the National Landlords Association (NLA), David Salusbury, has affirmed that the majority of landlords involved in sale and rent back schemes go about their business with “professionalism and integrity” and bemoaned the fact that “a small number of ‘rogue’ operators have now brought the entire market under scrutiny.”

The director of DB Housing, a company that offers the sale and rent back option, Daniel Lowerson has assured people that recent press about sale and rent back schemes “focuses on the negative aspects of a tiny minority in the marketplace. We don’t necessarily classify ourselves as a sale and rent back company, we have the option of shared ownership but we also offer full rescue projects and home recovery schemes. In my opinion, I welcome news that the FSA will regulate the industry. As soon as it’s regulated the better, as then good companies who do business correctly can thrive.”   

This entry was posted on 12/10/2008 at 10:32 am and is filed under Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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