Government pushes for regulation of sale-and-rent back

Friday, 6 February 2009 2:50 PM

The Treasury is now pushing for the scandal-hit sale-and-rent back sector to have regulation.

Today, the government published a consultation document on strengthening protection for vulnerable homeowners - with the aim of bringing some form of regulation by summer.

The Financial Services Authority (FSA) is also publishing a separate consultation into new rules for sale-and-rent back - where homeowners sell their homes at a discount for a quick sale to a landlord and then rent it back from them - as the government fast-tracks protection rules.

Yvette Cooper, chief secretary to the Treasury, who has taken a personal interest in increase protection in the sale-and-rent back sector, said: "Many people are worried about their homes and their mortgages right now.

"Unscrupulous companies must not be allowed to exploit people when they are vulnerable with dodgy deals that end up pushing people out of their home."

The consultation follows a report into sale-and-rent back proposing FSA regulation, which Ms Cooper said "found some shocking cases".

Criticism of sale-and-rent back has focused on homeowners facing unfair valuations of properties, entering into agreements to sell that were not in their best interest, no security that they will stay in their homes after selling it or that rents will not be pushed up.

Cases of homeowners already in stressful, difficult financial and emotional situations being pressured into making a sale have also been reported.

With a quick sale - sometimes advertised as taking place in 48 hours - consumers are unable to examine their full options.

Michael Coogan, director general of the Council of Mortgage Lenders, said sale-and-rent back could potentially be a realistic alternative for some people "as a last resort".

"But basic regulated standards of fair treatment and redress are essential, to avoid vulnerable households being exploited by unscrupulous operators," he said.

"We look forward to the July implementation of regulation - in the meantime, consumers should continue to make sure they have explored all the options with their lender before considering this route and if they choose sale and leaseback be extremely careful."

Dominic Lindley, personal finance campaigner for Which?, that is advising any homeowner to avoid sale-and-rent back until regulation is in place, said: "If you are having difficult meeting your mortgage payments, contact your lender and speak to an independent debt advice agency."

"In the current economic environment, consumers are at significant risk of not getting a fair price for their home and facing the risk of eviction in as little as six months.

"Prompt action is needed and the swift introduction of a regulatory regime for sale and rent back schemes by the FSA is a step in the right direction."

The FSA is now proposing interim regulation to come in by July 2009, followed by full coverage in 2010.

The FSA consultation states doing nothing is not viable and just raising consumer awareness would not be sufficient.

Regulation will include tests for firms to be "fit and proper", training for staff, rules to ensure customers are treated fairly, and the option for dispute resolution from the Financial Ombudsman Service.

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