FSA calls for 'fairer' sale and rent back

09/02/2009

Britain's financial regulator has moved to take tighter control of the controversial "sale and rent back" sector.

In a new consultation paper, the Financial Services Authority (FSA) said that it was looking to create new rules in order to force providers to treat their customers more fairly.

Sale and rent back schemes work through having a householder struggling with their mortgage repayments sell their home to a third party and continue to live in the property in exchange for paying rent.

While the plans can offer a valid solution for certain customers, providers have been found by a recent Office of Fair Trading (OFT) report to be evicting some tenants against their wishes when their original contract runs out - which can be as little as six months after the home is first sold.

The schemes are also anticipated to become more in demand in the UK, as repossessions rise and more and more people fall into negative equity due to the property slump and economic downturn.

Dan Waters, FSA director of retail policy, said: "We believe the issues identified by the OFT warrant a fast response, which is why we are seeking to bring in an interim regime this summer designed to ensure fairer treatment of customers as soon as possible, including the right to redress.

"We will then develop a more comprehensive regime to come in from next year."

Kevin Still, EuroDebt director, added: "We welcome the interim regime as we are seeing more and more people in debt where a ‘sale and rent’ back solution may be a valid option either stand-alone or in conjunction with a Debt Management Plan.

"Good examples are households under notification of a court hearing for repossession or already in significant arrears with their mortgage provider."

The interim regime is to come in by July.

Tags; Housing Debt and Bills, Young Family Finances,

• Share
• 
• 
• Store
• 
• Follow
•