Sale and rent back regulation comes into force
Today sees the introduction of new regulation to protect consumers looking at sale-and-rent back schemes.
The sector has been hit by numerous tales of consumers losing their homes when better options were available, being pressured into accepting very low prices for their homes, being cut off from benefits and still facing debts afterwards.
On the surface, the option of selling the home quickly and being allowed to rent it seems simple, but many people have been burnt by a sector that was until today completely unregulated.
It is hoped the initial interim regulation rushed in will stop cowboys taking advantage of people suffering because of the recession.
It is also hoped greater awareness of help for homeowners available from the government, local authorities and through banks will also reduce the number of people turning to sale and rent back.
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.
John Socha, vice-chairman, National Landlords Association, said: "The clock is now ticking if companies or individuals want to continue with sale and rent back transactions.
"Ethical sale and rent back must be an option for some consumers. It provides flexible tenure and the ability to remain in their property for those who can no longer afford the costs of home ownership."
He added while sale and rent back will not stop repossessions, ethical sale and rent back could be a way for homeowners to remain in their properties but become tenants.
"Only when sale and rent back operators are within a more regulated environment can we be confident that consumers will be treated fairly," Mr Socha added.
Andrea Rozario, director general of the equity release body SHIP, which has been keen to distance itself from sale and rent back, said: "In the past, we have been very concerned about the lack of information given to customers about the practicalities and risks associated with sale and rent back products.
"However, with the current economic downturn, it is inevitable that more and more consumers are looking to their housing equity to relieve financial pressures.
"Therefore, we hope that today is the first step towards providing a safe regulated environment whereby consumers can make an informed choice as to whether sale and rent bank is right for them and have some protection should they proceed."
She added there are clear differences between sale-and-rent back and equity release, mainly being the security of tenure in a property and no monthly rents.
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