Rent Back Industry To Be Regulated

The OFT study is both comprehensive and accurate, I have found it extremely enlightening and it reinforced my views on best practice for the sector.

The importance of a tenants’ long term security in the property does need to be addressed. At the moment, there are many creative ways of offering long term tenure, including covenants, deeds of trust, right of renewals, letters of intent and compensation guarantees, all are restricted however, by mortgage lenders requirements to 6 or 12 month AST’s.

The CML explain that this has been due in part to negative issues surrounding the sector. As regulation occurs and SARB gains credibility, it is likely that lenders will review such tenancy requirements.

In truth Housing Benefit regulation 9(1)(h) does exempt Housing Benefit payments, in the majority of cases, from being made to former homeowners for 5 years in the same property.

However, the exceptions to this rule occur when a homeowner was left with no choice but to sell, for example if repossession is imminent or is a future inevitability, or if there is no repayment vehicle for a mortgage ending in the near future.

In SARB it is critical that a landlord checks the tenants’ current affordability and future ability to pay before the transaction takes place. This makes both compassionate and commercial sense, a property is worth less to a landlord when it is empty or housing a tenant who cannot pay the rent, than if it houses a tenant who is happy to pay the rent each month.

I believe that regulation of SARB is necessary, right and appropriate. It will be a massive step forward for all parties. Sell and Rent Back schemes will become more available, more sustainable and a real acceptable alternative to repossession or forced relocation.

In addition to this, they will provide an excellent back up to the government and local councils’ Mortgage Rescue Schemes. They often have to reject applicants due to limited budgets and narrow criteria, leaving a space that private schemes can fill.

Furthermore, regulation of Sell to Rent Back will bring this industry into the mainstream, with this will come support from lenders and commercial financiers, in this manner, we will be able to offer services to a wider audience.

The OFT have said, in the Market Study “For some consumers, however, a sale and rent back transaction may be the best way forward – our research suggests that some individuals find the ability to sell and rent back their own home extremely valuable.”

In truth I feel that Sale and Rent Back can be an excellent solution for some homeowners, but have always believed that it has to be a Long Term Sustainable Solution for all stakeholders.”

If you need to stop repossession or are interested in rent back I can put you in touch with the most suitable specialist based on your location, property value and personal situation.

Gavin Brazg (Editor)