Beginner's guide to: Sale and rent-back schemes

How do they work?

The theory is that people who are struggling with mortgage payments can sell their properties, but continue to live in them by paying a predetermined low rent to the new owner. Sale and rent-back agents claim customers are reassured by the idea that they can live in their own homes for the foreseeable future and have a lump sum.

What's the problem?

It sounds like a winning situation for cash-strapped consumers, but often agents fail to deal fairly with homeowners. Many will give very low prices for the property. Worse, despite promises that the ex-homeowning tenants can stay in their home for as long as they like, many unscrupulous landlords kick tenants out a few months after the deal is done. Others inflict huge rent increases. Sale and rent-back schemes have remained unregulated, but unfair treatment has led to demands that something be done, especially as arrears and repossessions soar and more people could take on such agreements.

What happens next?

The Financial Services Authority (FSA) is consulting on how best to regulate the sale and rent-back market. The watchdog is introducing an interim regime to try to protect as many consumers as possible. Sale and rent-back firms will have to meet the FSA's basic conditions for regulated financial services.

What should I do if I've lost out via a sale and rent-back scheme?

Because the industry hasn't been regulated, you will find it difficult to pursue a complaint. But if the landlord has broken the law on the contract, you could sue. If you feel you have been a victim of a rogue agent or firm contact your financial adviser, legal representative or the Financial Ombudsman Service for advice. If you're having problems paying your mortgage, sale and rent-back schemes are rarely the right option. Seek free advice from the Consumer Credit Counselling Service ( www.cccs. org.uk; 0800 138 1111).