The Office of Fair Trading is looking into the advertising used by 16 sale and rent back companies.
A number of so-called sale and rent back firms are having their adverts scrutinised by the Office of Fair Trading (OFT).
These companies operate by purchasing properties from homeowners - who are usually struggling with their mortgage repayments - then renting them back to the occupant. The transactions are "usually at a significant discount", according to the OFT.
The 16 companies being investigated have adverts that make various claims, including that the previous owners will be able to stay in the properties as long as they like at a fair rate, and that they will be able to buy the home back "at an agreed point in the future". The OFT has asked the companies to prove these claims within 14 days. If they fail, they could be prosecuted.
Action was required because the OFT discovered during a study last year that some of the firms were being dishonest with customers, either by undervaluing their property or not being clear about how long they could stay. With the Council of Mortgage Lenders predicting that 2009 could see 500,000 repossessions in the UK, the issue has become more pressing.
"Sale and rent back companies must be clear and transparent about the services they offer and the security consumers have as tenants," said OFT senior director of consumer protection Heather Clayton. "Clarity of advertisements is particularly important in the sale and rent back sector where customers may be under stress from financial difficulties, at risk of losing their homes and making important and complicated decisions."
