Friday, January 29, 2010

Such firms must now be regulated by the FSA and be run by people it deems to be fit and proper

Sale and rent back deals must give five-year tenancies

The companies had been accused of luring people into selling their homes at a discount, only to evict the former owners within months so their homes could then be sold at a large profit.

Posted by matt_the_hat @ 02:27 PM (1188 views)
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8 thoughts on “Such firms must now be regulated by the FSA and be run by people it deems to be fit and proper

  • sounds ideal for out-of-work bankers

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  • For regulation like this to operate without moral hazard, it must be extended to the whole of the private rental sector.

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  • they only get evicted if they don’t pay the rent they agreed to pay. your post is misleading. they aren’t chucking the tenants who pay out on the street.

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  • One rule for them, another rule for us.

    If you sell your home and move into (different) rented accommodation, you only get a standard 6-month Assured Shorthold Tenancy. In theory you could negotiate a longer term with the landlord / letting agency, but in practice they don’t offer such deals.

    By contrast if you enter a sell-and-rent-back contract, you now get 5 years security of tenure – that’s 60 months, ten times more than under a common AST.

    The outcome of this regulation is that the sell-and-rent-back companies will close, and all the people who would like to S&RB will end up in repossession instead. We can expect to see the repossession stats go up.

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  • drewster – if your expectations come to fruition it will be another factor to push prices down.

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  • drewster

    Correct, the banks only lent to BTL in the first place because of the favourable (to the banks and landlords) short tenancy agreements 6 months then 1-2 months notice.

    So with 5 years notice banks won’t be interested in funding thes buy and rent back companies.

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  • Repossessions don’t figure in the Haliwide indices, because according to them, the houses are ‘not sold at fair value’.

    yep, ‘fraid so.

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  • Not only do repossessions not tend to appear in the figures, but neither do most properties sold at auction. This is an exception – 26 Fairfield, NW1.

    2bed flat within walking distance of Mornington Crescent and Camden Town tube stations, sold off last year by Camden Council because it presumably wasn’t worth the money spending on it to make it habitable for a council tenant. I went to see it, needed a complete rewire, central heating, bathroom, kitchen, basically everything. My guess is the lucky bidder would have spent no more than £20k tops leaving £90k profit before legal and auction fees, stamp duty, capital gains etc. But I digress…

    I’ve recently started looking into BMV properties and am a bit surprised so many of you are against these new regulations if they stop people profiteering on certain people’s misfortunes and stop the currently cash-rich from increasing their property portfolios. Because that’s all that is happening.

    NONE of these BMV are ever making it anyway near the traditional market (estate agents and rightmove), unless it’s after the above scenario where the tenants are kicked out relatively swiftly and then you can be sure it will be at or only slightly below market value. So allowing the profiteer to make a quick 10 – 20%.

    I thought you guys were against the stockpiling of property by a small percentage of people. Because that’s still what’s happening right now and it’s getting worse.

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