The Office of Fair Trading (OFT) has launched a market study into the sale and rent back sector.
The arrangement – also known as sale and lease back – enables homeowners to sell their property at a discount to property investors or buy to let landlords in return for the option to remain in the house as a tenant. It can be seen as attractive to people in financial difficulty and facing possible repossession of their homes.
This relatively new sector has grown quickly and with repossessions on the increase, and the current economic climate, the OFT considers this important market study is timely.
The OFT intends to take a detailed look at the characteristics of the sale and rent back product and, bearing in mind the circumstances in which these products are sold, consider whether existing consumer protection legislation is sufficient and effective. It aims to complete the work in September this year.
John Fingleton, OFT Chief Executive, said: “Sale and rent back schemes might be helpful for some consumers but there are a number of potential concerns including whether consumers in difficult circumstances are making well informed choices. We are therefore prioritising this work to take a good look at whether consumers are adequately informed and protected.”
David Salusbury, Chairman, National Landlords Association (NLA), said:
“The Government announced in this year's Budget that the OFT was set to take a detailed look at the characteristics of sale and rent back. We are pleased to see that this critical market study is now underway.
“Sale and rent back is relatively new but is set to grow considerably over the next 12 months. With a tighter economic climate, there is bound to be more interest from home-owners who are struggling to keep up with their mortgage repayments and are looking to stave off repossession. Sale and rent back will not be right in all situations and it should not be seen as some kind of panacea to serious financial difficulty.
“But it is precisely to protect these so-called 'distressed vendors' that we have drafted and are about to publish a comprehensive code of practice which will set out what best practice should be in this sector.”
The Property Buyers Association (PROBAS) also welcomed the announcement by the Office of Fair Trading (OFT).
Glenn Ackroyd, PROBAS Chairman, said: “PROBAS is delighted that the Office of Fair Trading has announced a market study into the sale and rent back marketplace.
The PROBAS membership strongly believes that further regulation in the sector is needed if consumers are to be better protected. We look forward to working with the OFT team in the coming weeks to put forward our views.
“In the interim, our members are adopting best practise measures to protect consumers. This includes adopting our Code of Practice, providing Key Facts Illustrations in plain English, providing complaints procedures and a bonded compensation scheme.”
The OFT will contact trade bodies, providers of sale and rent back arrangements, consumer groups and other organisations associated with the industry. It also wants to contact consumers who have used sale and rent back schemes. The OFT will also contact, and work closely with, other government departments, including the FSA, throughout the study.
Other interested parties can submit written views to:
Sale and rent back study
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4Y 8JX
Email: saleandrentback@oft.gsi.gov.uk
