Property 'Sale & Rent Back' Schemes Should Be Regulated
Companies that buy and rent back properties to people on the verge of repossession have come under close scrutiny as shady goings-on are uncovered.
Adam Sampson of the housing charity ‘Shelter’ has labeled such companies that do not honour their promises as "rip-off merchants". Although he believes the general idea behind sale and rent back is sound, the charity boss claimed Shelter had encountered many flaws and worrying concerns in some property scheme cases.
While some companies are only paying homeowners half of the market value for their homes, others are not honouring promises of renting back the property so that the former homeowner can continue to reside there as a tenant.
In a statement Mr Sampson said, "People are being ripped off. We are seeing people who are getting only 50% or 60% of the value of their homes instead of the 70% to 90% they should be getting. Many of the promises made that people can stay in their homes for the rest of their lives, are not being honoured."
He also warned that repossession was not necessarily avoided by selling your home in a sale and rent back scheme.
"Some of these schemes are themselves financially unsustainable. We have had people whose homes are being repossessed because the people they sold them too couldn't keep up with their payments," he added.
On the other side of the argument, Glenn Ackroyd of 'A Quick Sale', one of the many buy and rent back companies, maintains that these schemes help over 20,000 people a year in the UK avoid repossession.
In an interview with Radio 4's Money Box programme Ackroyd claimed the sale and rent back industry provided a "market solution to mortgage arrears". He estimated such business was currently worth in excess of £2.5billion and said,
"These people otherwise would be repossessed and in turn would be homeless and need re-housing. Instead they can sell and rent back. They can release equity. And often the rental payments they pay are far less than their previous mortgage payments."
With no denying from both parties that there are scam artists out there waiting to prey on innocent victims, it is agreed that the Government should step in and take action. The overall opinion is that the Government needs to regulate the companies involved in sale and rent back. This would then crack down on any dodgy schemes that are in it only to make a quick profit.
John Socha, Chairman of the National Landlords Association said, "We have concluded that there will be some sort of regulatory body but even if the Government says regulate now it will take two years to do it so we need to do something now."
Socha is currently drawing up a Code of Practice for the sale and rent back industry.
Housing charity Shelter is also demanding immediate action for some form of control to be put into operation.
Boss Adam Sampson announced, "We have already written to the Treasury asking for the Government to intervene. They can regulate the financial operation of the business and look at the advertising campaigns. Many of the promises are misleading and that is one aspect that can be dealt with very quickly."
Published on February 18, 2008
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