Growing concern over sale and rent back

Concerns have been raised over the rapid growth of the sale and rent back sector of the UK property market during the credit crunch.

The transactions see homeowners sell their property to a landlord or property company and then rent it back in order to release latent capital.

However, the Charted Institute of Housing (CIH) has warned "misery is being stored up for home owners in the future" by the deals, even after the credit crunch has passed.

Particular concern is raised at the marketing practices employed by some companies, some of which appear to be targeting vulnerable communities and people faced with negative equity, growing debts or facing imminent repossession.

The CIH is also concerned at the potential lack of consumer protection resulting from the speed of some of the transactions - some can be exchanged within 24 hours and completed within two to fours weeks - and from the type of tenancies being offered.

Uncertainty remains over the length of tenure offered to tenants, as well as the level of rent charged.

"Many homeowners are already paying the price for the mistakes of some financial institutions," said CIH chief executive, Sarah Webb.

"It seems inconceivable that we can expose homeowners to a second round of misery from an unregulated sector which may be offering inappropriate financial solutions.

"We would urge the Office of Fair Trading (OFT) and government to look at this market now and put in place some essential protection from worried homeowners."

While the market is presently unregulated by the Financial Services Authority (FSA), the Office of Fair Trading (OFT) announced in May it intended to undertake a market study of the sale-and-leaseback sector.

However, the CIH - the professional body for housing – is now demanding the OFT speed up the review to get protection in place as soon as possible.

The CIH also wants the government to introduce its own short-term mortgage rescue initiative to provide protection and security for an estimated 45,000 households in danger of repossession this year.

"In addition, homeowners need a genuine choice to help them stay in their own homes and we would urge government to introduce its own mortgage rescue plan using trusted and regulated landlords - who are able to provide a service which will always be in the long-term interests of homeowners," concluded Ms Webb.

Chris O'Toole