Sale and rent back: Vulnerable homeowners must be protected
Monday, 13 Oct 2008 08:39
Sellers beware of accepting any offer
Vulnerable homeowners must be protected from 'sale and rent back' cowboys as soon as possible.
This week, the Office of Fair Trading (OFT) will publish its findings into the sector and is expected to demand greater legal protection for those choosing to sell their homes and then rent them from the new buyer.
Sale and rent back has come under a large degree of scrutiny in recent months as the credit crunch has put more homeowners under pressure – with rogue operators offering to buy homes at a massive discount, charging large valuation fees and providing little long-term guarantees that people can remain in their homes.
Ahead of the OFT decision, the National Landlords Association (NLA) is launching a voluntary code of practice – following consultation with the mortgage and housing industries and charities.
David Salusbury, NLA chairman, said he was committed to removing cowboys from the entire private-rented sector.
"Sale and rent back is not appropriate in all situations. However, for some families who can no longer afford the costs of home ownership, ethical sale and rent back should certainly be explored," he said.
"We are under no illusions that some property investors have seen the chance to make a quick buck. However, we firmly believe gambling with people’s homes is unacceptable.
"Changes to the sale and rent back market must begin now."
SHIP (Safe Home Income Plans) – which provides a code of conduct for the equity release industry – is calling on homeowners no t to be confused by between sale and rent bank and equity release.
Andrea Rozario, director general of SHIP, said: "Whilst we acknowledge that there may be some ethical sale and rent back companies, we are concerned about the number of providers who are making misleading claims in their advertising.
“For the avoidance of doubt there is no comparison between regulated equity release schemes, with which consumers have the full protection of the FSA in addition to the safeguards implemented by SHIP, and the non-regulated sale and rent back sector."
The two main differences consumers should take note of are the security of tenure, all regulated equity release products give policy holders the right to live in their homes for life; and no monthly rent, equity release schemes do not require regular payment from policyholders.
“However, misleading advertising can often lead consumers to believe that these two types of product are one and the same," Ms Rozario said.
"We recommend that consumers always take qualified financial advice before making any financial decisions which will ensure they are aware of all of their options."