Sale and Rent Back Deals Get More Protection
A new rule announced this week in the final regulation from the Financial Services Authority (FSA) means that anyone who decides to swap ownership of their house to then rent it back have to have a guaranteed tenancy of at least five years. The new rule will begin from the 30th of June this year, and aims to prevent consumers from being preyed on by companies who force them to leave their homes shortly after they begin a rent back scheme.
Ed Harley from the Financial Services Authority said:
?For some people in financial difficulty, staying in their home remains very important and selling their home and renting it back in this way can be right for them.
But we are aware of some firms exploiting vulnerable consumers at a difficult time. So, it is right that we introduce these further protections, and we will take swift action where they are not met.?
This is just one of the rules laid down by the scheme, however. There are a number of additional elements to the FSAs regulations, which have been in progress since September 2009. The new rules include a ban on heavy advertising and sales techniques, a two week cooling off period and a ban of leaflet dropping and cold calling.
These regulations have come as a direct result of an enquiry in 2008 that found many companies operating rent back schemes were being dishonest. Companies were buying homes at a discount and then selling them on within months, but promising the owners beforehand they would be free to stay in their homes.
The firms typically prey on people who are going to be facing repossession of their homes, but not they will fall under the regulation of the FSA, so scams and disreputable companies will hopefully be far less likely.