Clampdown go ahead on sale and rent back

The sale and rent back sector needs statutory regulation with better protection for consumers, says an Office of Fair Trading study published today (Wednesday).

The sector has been highly controversial, with individuals and companies buying up distressed properties at under the market price and allowing the former owners to stay on as tenants.

But critics say that they have no security of tenure and that many homeowners facing mounting debt and the possibility of repossession virtually give their properties away.

The OFT report says that some consumers enter into sale and rent back transactions when it is not their best option, and many sale and rent back operators mislead them. “This includes telling people they will be able to stay in their home for years, when in reality the tenancy may only be guaranteed for six to 12 months,” the report observes.

The OFT also criticises operators for hiking rents and evicting tenants, and is concerned that former homeowners may become homeless if their new landlord defaults on the mortgage.

The OFT is calling for the Financial Services Authority to regulate the sector.

John Fingleton, OFT chief executive, said: “Recommending statutory regulation is not something we do lightly or often. However, in this case we consider it necessary to put a stop to the unacceptable behaviour of some sale and rent back operators and to ensure consumers are better protected.”

For a copy of the report, click on www.oft.gov.uk/saleandrent