Sale-and-leaseback: Not as safe as houses
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With savings and pension funds depleted by the recent economic turmoil, pensioners are looking for other ways to supplement their pension and many are using their house as a way of generating cash. More...
Sale-and-leaseback regulation demanded
Tuesday, 23 Oct 2007 10:29
The sale-and-leaseback sector should be regulated by the Financial Services Authority (FSA), claim the Council of Mortgage Lenders (CML), Citizens Advice and housing charity Shelter.
While equity release is now regulated by the FSA, the sale-and-leaseback sector, where consumers sell their homes outright and rent from the new owner, is not covered.
The sector has come under a great deal of criticism for offering prices far below the market price to those with debt problems, not guaranteeing a former owner's right to stay in a home beyond the length of the original lease – often just one year – and setting high levels of future rent.
"The actions of some companies offering sale-and-lease back schemes amounts to daylight robbery, leaving growing numbers of people financially ruined and homeless," said Adam Sampson, chief executive of Shelter.
"The government must urgently introduce regulation to stamp out this unscrupulous practice, which is cashing in on people's financial problems and deepening their misery."
Teresa Perchard, Citizens Advice public policy director, added: "We have seen a number of cases where people in mortgage arrears and facing the threat of repossession have gone ahead with a so-called 'mortgage rescue' scheme on the understanding this would allow them to remain in their home in the longer term, only to find themselves homeless within a year.
"These schemes can be difficult to understand, and the information about them can be misleading."
Michael Coogan, CML director-general, said: "Controls exist for action taken by mortgage lenders when customers are in arrears but there are no such safeguards for customers entering into sale-and-leaseback schemes.
"In a climate of rising repossession, consumers in financial difficulty need to be well informed and protected.
"The government needs to consider urgently whether regulation of sale-and-leaseback schemes by the Financial Services Authority is appropriate because it would provide protection for potentially vulnerable consumers."