Author: Michael Challiner
Under a “sell and rent back” deal, a homeowner who is struggling to repay their mortgage sells their property at a discount to company who then allows them to remain in the house as a tenant. But a report from the Office of Fair Trading has found that these arrangements may not be the homeowner’s best option and some people had been swiftly evicted. As a result the Office of Fair Trading has ordered sixteen firms to validate all the claims they have made in their advertising. If the Office of Fair Trading finds “unfair and misleading” practices, it expects to take action which could include prosecutions.
The OFT said the advertisements to be investigated typically included claims that clients can remain in their homes after they were sold, by renting them back from the company purchasing the property at fair rental rates and for as long as the tenant wishes. Clients were also promised that they can buy back their house at an agreed point in the future. In the meantime they would have very flexible rental terms with low rental periods.
“Sale and rent back businesses must be truthful and transparent about the services they offer and the security that prospective tenants will enjoy,” said a spokesperson for consumer protection from the Office of Fair Trading. “Clear advertising is particularly important in the sale and rent back sector where clients could be under severe stress from financial problems and at risk of losing their homes. These stress levels complicate the difficult and important decisions homeowners have to make.”
The report from the Office of Fair Trading called on the firms involved in the business, over one thousand of them, to be far more transparent. (An unknown number of private landlords are also involved in this relatively new industry.)
The Office of Fair Trading said that about 55,000 property sales of this kind have taken place and they have expressed concern that sale and rent back deals have potential to cause serious and permanent harm to homeowners when they are most vulnerable. “Consumer groups have also urged for regulation of sale and rent back schemes, which some also call “mortgage rescue plans”.
It seems that much of the advertising is targeted at those facing repossession. And the Council of Mortgage Lenders predict that there could be over half a million repossessions in the UK this year, up from around 220,000 last year.
But the Office of Fair Trading’s report suggested there were better options for some of these homeowners. The report highlighted advertising containing misleading details with some tenancies only guaranteed for six to 12 months, although residents were otherwise led to believe that they could remain in their homes for years to come.
The report also identified that some landlords significantly raised the rent and moved quickly to evicting tenants who struggled to pay. And some of the former homeowners lost their homes anyway after becoming tenants, because their new landlord had defaulted on their mortgage and the property was subsequently repossessed.
The National Landlords Association has commented that there is a place for sale and rent back schemes in the housing market so long as they were operated ethically. It said that it wanted to see a code of practice put in place by the Office of Fair Trading with powers to police the code. Meanwhile, the Council of Mortgage Lenders and Citizens Advice have also urged for the speedy implementation of regulation in the sector.
About the Author:
Don’t let your debts, risk your home! Visit IVA Advice Blog now! On our website we provide all our UK customers with information and articles about Debt Advice Debt Management and Debt Help. So get quoted and get out of Debt!
Article Source: ArticlesBase.com – Sell and Rent Back Arrangements
Related Reading:
Subprime Mortgages: America's Latest Boom and BustOver the past decade, a new mortgage market offering loans at low interest rates and for little or no money down has given low-income people an opport... Read More >
Mortgages For Dummies, 3rd EditionNeed a mortgage but worried about the market? In Mortgages For Dummies, 3rd Edition, bestselling authors Eric Tyson and Ray Brown give you proven solu... Read More >
Mortgage Ripoffs and Money Savers: An Industry Insider Explains How to Save Thousands on Your Mortgage or Re-FinanceCarolyn Warren better get a bodyguard. Her new tell-all on the mortgage industry exposes so many of the lending industry's favorite frauds, every loan... Read More >
Mind Your Own Mortgage: The Wise Homeowner's Guide to Choosing, Managing, and Paying Off Your MortgageThis Is the Book Lenders DON'T Want You to Read.
EMPOWERING HOMEOWNERS TO SHOP, MANAGE, AND ELIMINATE MORTGAGE DEBT
A mortgage... Read More >
The Handbook of Mortgage-Backed SecuritiesThe definitive MBS guide, with fully updated material on the latest mortgage-backed products, methods, models, and portfolio strategies
By ... Read More >
Possibly Related Posts:
- Factors That Determine The Amount Of A Mortgage Loan
- What Makes a Good Mortgage Broker?
- Mortgage Debt Information
- Home Mortgage Rate – the Answer to All Financial Crunch is Home Mortgage Rate
- Fixed Rate Mortgages – How to Secure the Best Fixed Rate Mortgages
If you enjoyed this post, make sure you subscribe to my RSS feed!
