Why, rather than providing a rescue solution for struggling homeowners, many sale and rent back schemes are doing more harm than good.
At a time when record numbers are struggling to keep up with their mortgage repayments and repossession is becoming a very real threat for many homeowners, ‘sale and rent back’ schemes have been jumping to the rescue. However, as with any miracle cure some critics believe that rather than helping those in financial difficulty, these types of plans are actually exploiting them.
In essence the schemes do what they say on the tin; pitched at those who want to continue living in their family home but are unable to afford the mortgage repayments, they will purchase your property from you but allow you to continue living there under a long term rental agreement in a solution that can seem incredibly enticing to those with limited options.
However, while ‘sale and rent back’ agreements do help around 20,000 homeowners a year avoid repossession, many are not the knights in shining armour they can seem.
Speaking to the BBC, Adam Sampson, a spokesperson for housing charity Shelter tarred many of these companies as “rip off merchants”, warning that while the arrangements are beneficial in principle people are being severely short changed.
He commented “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 that are made that people can stay in their homes for the rest of their lives are not being honoured."
At the present time there are no regulatory measures in place to govern either the practice or advertising of the ‘sale and rent back’ sector, meaning that schemes are free to mislead and exploit those in financial distress.
While, after repeated calls from Shelter, a Code of Practice has been drawn up, it could take over two years to implement. In such financially uncertain times, this delay could mean a huge number of vulnerable homeowners look to these schemes as a solution to their problems, only to be let down when it matters.
