Sale-and-rent-back - disaster waiting to happen?
One of the UK’s leading charities has stated that sale-and-rent-back property schemes are a disaster waiting to happen and something needs to be done sooner rather than later.
The claims come from the Citizens Advice Bureau who have called for more official regulation of firms involved in the scheme. Currently firms are simply buying the homes of people who are at risk of repossession at a knock down price and then renting the property back to the former owner.
Citizens Advice has found that some companies are paying less than 60% the value of homes and not providing any guarantee that owners will be allowed to remain in the home after a standard 6 to 12 month rental period has expired.
Typically these schemes attract bad debtors who are in danger of defaulting on their home loans. These companies step in before the loan lender puts a repossession order on the client. However, the process frequently just ‘buys time’ before the family are forced to leave their home, usually in a worse financial position than if the bank had forcibly sold their home at the going market price.
Peter Tutton of Citizens Advice has stated on ITV1’s Tonight with Trevor McDonald that: “We’ve got people who are vulnerable trying to stay in their home being enticed into an industry that has no controls on it at all at the moment and that is a disaster waiting to happen.”
He went on to say: “Unless something is done to bring this industry into some kind of regulation to get some sort of framework of quality and assurances for people entering into these agreements, the kind of security tenure they’re going to get, what they are paying and what protection they get against things going wrong, we could see a lot more people really finding they are losing out lots of money and still losing their homes.”