Sale / Rent Back Schemes: Not Always What They Seem

As the slumping economy and ensuing credit crunch takes hold, and more and more people are struggling with their mortgage repayments, a number of companies are springing-up who offer a "sell / rentback" scheme. This type of proposal involves the homeowner having their house bought from them, for a percentage of its market value, then offered the chance to be a tenant, negating the need to have to vacate the premises.

For some, it seems like the perfect opportunity to get rid of a mortgage problem and not have to deal with the hassle of moving. However there are some critics who state that the schemes may not be all they appear to be and might actually be more trouble than they’re worth.

Some homeowners have reported receiving only half the market value of their house, with others stating the rental agreement was not upheld. There is also the risk that the company to whom the house is sold may not be able to maintain the mortgage repayments, and you, as former owner turned tenant, will ultimately face eviction anyway.

Although the general idea behind a sale and rent back is sound, the way it is handled and put in place is not, and homeowners aren’t as protected as they might think they are. As soon as they have sold their house to one of these schemes, then they have very little control over and above what is written in their contract. This forms the basis of one of the main arguments against sell and rent back companies – that the landlord can set the purchase price, rent and terms of the lease, and is very likely to be abused.

There are a lot of calls for this industry to be more highly regulated, in order to give customers the protection they deserve, and if complaints about various companies continue to rise, then the government and Office of Fair Trading will have to step in at some point and put down some ground-rules.

Do you know anyone who has sold, or may be thinking about selling, their home on one of these "Sale Rent Back" schemes? Tell us about it by clicking the comment link below. Your identity is safe, as no email addresses will ever be published here with a comment.