Julian Knight: Parasitic they may be, but sale and rent-back schemes are here to stay

I don't like sale and rent-back schemes – firms promising to buy homes from people who are behind with their mortgage repayments at a knock-down price on the proviso that they become a tenant.

For me, sale and rent-back is an industry cut from the same cloth as ambulance-chasing law firms, consolidation loan companies and Individual Voluntary Arrangement providers: exploitative and parasitic.

In too many cases homeowners are left with a very poor deal: not only are they selling for as little as half the property's value but, also, the tenancy agreements can be short-term – sometimes as little six or 12 months. After these agreements come to an end the new owner can turf out the previous one, and often does.

Another risk to the sellers is that as tenants they rely on their new landlord to keep up mortgage repayments or face the ignominy of eviction – something they pay a hefty price to avoid. Post credit crunch this has become a real problem as some of the smaller sale and rent-back operators – we are talking single-person operations here, quite often – unable to service their debts.

Now, fortunately, a Birmingham County Court judge has stepped in and ruled that a sale and rent-back tenant cannot be evicted under such circumstances. Paul and Amanda Jackson had lived in their Shrewsbury home for 23 years when they entered into a sale and rent-back agreement. Their landlord apparently promised that they would be able to live in their home indefinitely, but this looked like an empty promise when their landlord fell behind with repayments. The lender went for repossession but the charity Shelter took the case to court on behalf of the Jacksons, and in a landmark ruling the judge said the couple could remain either by taking out a new mortgage themselves, or by renting the property from the mortgage lender. Let's hope this judgment holds water, and that other people in a similar position can gain similar protection.

Unfortunately, I don't think this is the end of sale and rent-back. The promise made to the Jacksons was highly unusual. In most cases, sellers are told upfront that they have short-hold tenancy rights only, and the credit crunch has killed off the smaller cowboy operators. What's more, the market is now subject to Financial Services Authority "part regulation" as a prelude to full regulation next year. Again, the regulator moves at the speed of tectonic plates.

Bravo Nationwide

There are those who will no doubt criticise the Nationwide for its 125 per cent home loan launched last week. Memories are still raw from Northern Rock's cretinous Together mortgage, which also offered 125 per cent loan to value.

But whereas the Rock's loan was simply top-of-the-market greed, Nationwide's move is sensible and to be applauded. As Chiara Cavaglieri reports on page 81, the building society's offering is designed to help those customers who can afford their repayments but are in negative equity. The idea is that customers will still be able to move home while porting over their negative equity, rather than having to sell up, repay what they owe entirely and then fund another house purchase. In short, it means that people who have to move – perhaps for family or work reasons – won't have to crystallise their loss.

Instead, they can move, take their debt with them and hope that the market recovers sufficiently that the negative equity will disappear or that they will pay down the loan. Realistically, this is only going to affect a tiny number of the million-plus families in negative equity, but if other lenders adopt a similar approach it will mean fewer lives are put on hold.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
Arts and Entertainment
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Is this how Mario Balotelli will cruise into Liverpool?
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
Arts and Entertainment
Poet’s corner: Philip Larkin at the venetian window of his home in 1958
booksOr caring, playful man who lived for others? A new book has the answer
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
Matthew McConaughey and his son Levi at the game between the Boston Red Sox and the Houston Astros at Fenway Park on August 17, 2014 in Boston, Massachusetts.
advertisingOscar-winner’s Lincoln deal is latest in a lucrative ad production line
Life and Style
Pick of the bunch: Sudi Pigott puts together roasted tomatoes with peppers, aubergines and Labneh cheese for a tomato-inspired vegetarian main dish
food + drink
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Junior Quant Analyst - C++, Boost, Data Mining

    £25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

    Service Desk Analyst- (Desktop Support, Help desk)

    £25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

    Junior Quant Analyst (Machine Learning, SQL, Brokerage)

    £30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

    UNIX Application Support Analyst- Support, UNIX, London

    £45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

    Day In a Page

    Air strikes? Talk of God? Obama is following the jihadists’ script

    Air strikes? Talk of God? Obama is following the jihadists’ script

    The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
    Ebola outbreak: Billy Graham’s son declares righteous war on the virus

    Billy Graham’s son declares righteous war on Ebola

    A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
    Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

    Not even Jeremy Clarkson is bigger than the BBC, says TV boss

    Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
    Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

    Nick Clegg the movie

    Channel 4 to air Coalition drama showing Lib Dem leader's rise
    Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

    Philip Larkin: What will survive of him?

    Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

    Waxing lyrical

    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
    Texas forensic astronomer finally pinpoints the exact birth of impressionism

    Revealed (to the minute)

    The precise time when impressionism was born
    From slow-roasted to sugar-cured: how to make the most of the British tomato season

    Make the most of British tomatoes

    The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
    10 best men's skincare products

    Face it: 10 best men's skincare products

    Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
    Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

    Mackay, Moody and another grim day for English football

    The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
    La Liga analysis: Will Barcelona's hopes go out of the window?

    Will Barcelona's hopes go out of the window?

    Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape