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Ash4781

Watchdog To Protect Sale And Rent Back

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http://www.thisismoney.co.uk/mortgages-and...mp;in_page_id=8

Controversial sale and rent back schemes that target cash-strapped homeowners will be regulated by the financial watchdog from 1 July.

The Financial Services Authority will protect consumers who sign up to sell their homes for below market value and then rent them back.

This is Money has campaigned for regulation of the market for two years, but the FSA originally said that it did not consider sale and rent back to fall under its remit, as it was regarded as a property transaction.

However, following an OFT investigation into sale and rent back last year, the Treasury has added sale and rent back to the FSA's coverage, subject to Parliament's approval.

Consumers can now expect fair and transparent valuations and the ability to complain to the Financial Ombudsman, although details of firm's exact guidelines are still being ironed out.

Under the new rules all firms offering sale and rent back must be FSA regulated and to qualify they will have checks carried out on ownership and funding and be expected to follow the watchdog's rules.

Sale and rent back companies tempt struggling homeowners with a quick sale and the opportunity to remain in their home, but those who take up the offer currently have little protection beyond a standard rental agreement.

Typically firms claim to offer around 80% to 90% of a property's value, but reports have shown sellers receiving less than 60% of their home's value and industry sources report that many customers have never attempted to sell on the open market.

The sale and rent back sector has grown substantially over recent years and contains large nationwide firms, small local operations and some firms that simply act as agents selling on tenanted properties to buy-to-let landlords.

Among the major problems sale and rent back customers face is that the company they sign an agreement with may not end up being the property's eventual owner and if their landlord goes bust they will face eviction.

There have also been reports of steep rental increases once an initial tenancy agreement runs out, evictions and high fees being levied.

FSA head of mortgage policy, Ed Harley, said: 'We know that some consumers enter into sale and rent back arrangements without understanding the costs and risks involved. This can be a source of real distress for people in already difficult circumstances.

'Firms entering our regime will need to run their business in a way that means customers are treated fairly. This includes making clear to customers important details, such as the length of time they can stay in the property, before they enter into the arrangement.'

The Office of Fair Trading had called for sale and rent back to be regulated urgently, after it found firms were misleading customers about the value of their homes and their security as tenants.

An FSA survey found only 42% of people knew that sale and rent back schemes were currently unregulated, and most thought they would be able to stay in their home for more than five years if they took out one of the schemes.

Interesting that they are bringing it under 'regulation'.

Edited by Ash4781

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