Sale and rent back: Who will protect the needy who've sold up for a song?

As more people are forced to become tenants in their own homes, Kate Hughes looks into attempts to police the industry

As money gets tighter for Britons, so mortgage repayments can quickly become unmanageable, leading homeowners to take desperate measures to avoid repossession. With so much at stake, "sale and rent back" schemes can start to look attractive.

The concept is simple. Those struggling with serious debt problems can sell their home, pocket any profit after the mortgage is paid off and then rent it back from the new owner. They continue to live there as a tenant.

But since this is, on paper, an agreement between two individuals rather than between a homeowner and a financial services company, the sale and rent back market is totally unregulated, and the potential for the unscrupulous to exploit the vulnerable is huge. Consumer groups say hard-up sellers are being offered well below the market price for properties, sometimes as much as 40 per cent, and in many instances are being given their marching orders from what used to be their home within months.

John Socha, chairman of the National Landlords Association and the recently created National Association of Sale and Rent Back (Nasarb) committee, admits that some providers "have been targeting the vulnerable" and says: "There are cases of massive rent hikes, and owner-occupiers being conned out of their own equity."

In response to malpractice, Nasarb last week announced it was to launch a voluntary code of conduct in April. This will take into account principles laid down by the industry regulator, the Financial Services Authority (FSA), to ensure providers put the needs of individual customers before profit during the sales process. Consumers will have the right to complain to Nasarb if its members have not acted in the spirit of the code – for example, if a tenancy agreement is terminated early. But crucially, Nasarb can only ask the provider to reconsider the case – it cannot insist that it pays compensation.

To add to this, the code of conduct applies only to the group's members – around 200 out of more than 2,000 sale and rent back firms in the UK. Operators range from one-man bands working from home to franchises with huge call centres. No one even knows how many there really are, despite an investigation by the Treasury.

Meanwhile, Mr Socha sees little likelihood of Nasarb members being forced under the new code to pay a minimum amount for the property – one of the most frequent ways in which sellers can be ex-ploited. "The formula is just too difficult to work out for this kind of rule," he says.

However, what Mr Socha does hope the code will incorporate is a requirement for the person entering into a sale and rent back agreement either to prove that they have taken the advice of a solicitor or to have signed a waiver saying they don't require advice.

"At least if we have put everything in place in an attempt to protect the vulnerable, and consumers go into these contracts with their eyes open, they can't complain later," he says.

But for the housing charity Shelter, that simply isn't good enough. Adam Sampson, its chief executive, says: "This voluntary code lacks any real teeth to ensure companies treat consumers fairly, and we urge [Nasarb] to call on the FSA to provide tougher, independent regulation of the sector."

Life and Style
health
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
Arts and Entertainment
Lena Headey as Cersei Lannister
TVSPOILER ALERT: It's all coming together as series returns to form
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
art
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine