ROOF Blog

Shelter has been investigating sale and rent back companies who take out adverts in national and regional newspapers to check whether the companies that are advertising are signed up to the FSA’s tough new regulations. Results show that out of the 18 main companies that advertise regularly in the press, four are still not signed up to the regulation and are therefore operating illegally. Kay Boycott, Shelter’s director of policy and campaigns, said: ‘We are shocked to discover some rogue and unregulated companies have the nerve to advertise in national newspapers when they are operating completely outside of the law. If almost a quarter of the big firms who are advertising in national newspapers are unregulated, then it is highly likely that many more of the smaller companies are operating completely under the radar.’

In the first court ruling of its kind a vulnerable family has been told they can stay in their home as owner occupiers or rent it for life, after almost losing it in a repossession sale and rent back scam. The case, bought before the court with Shelter’s help, saw the judge brand the sale and rent back company Repossessions Stopped as ‘dishonest’ for promising the family could stay in their home forever. Within two years of the company selling the property on, the new owner defaulted on the mortgage and the house was repossessed, with the family nearly evicted.

Homeowners who fall victim to rogue sale and rent back companies will be able to claim compensations from July. Those who unfairly suffer loss of money or of their homes through the schemes will be able to take their cases to the Financial Ombudsman. The Financial Services Authority will be able to stop, ban or fine firms that break new rules.

The government introduced secondary legislation to parliament yesterday to bring sale and rent back agreements within the scope of the Financial Services Authority. The move follows the government’s consultation period, including a number of Office of Fair Trading’s recommendations such as compulsory regulation, increasing consumer awareness and improving information about housing benefits.

Treasury plans to let the Financial Services Authority (FSA)  regulate the sale and rent back sector could save consumers up to £1.4 billion over a 10-year period. Regulation could offer consumers considerable savings because the prices some sale and rent back firms offer are ‘significantly below what would be offered in a functioning market.’ Anecdotal evidence indicates that some firms are buying homes for less than 50 per cent of their market value.

The Financial Services Authority (FSA) has published a consultation paper setting out proposals for the regulation of sale and rent back schemes designed to reduce problems facing consumers in this growing area. The paper has a two stage approach – an interim regime that will be brought in from July to address the most significant issues immediately; followed by full regulation which is likely to be implemented in 2010. The government accepted last year’s main recommendation from the consultation with the Office of Fair Trading which called for the FSA to regulate the schemes.

The Office of Fair Trading (OFT) has issued formal notices to 16 sale and rent back firms asking them to prove the claims they made in their adverts. The firms have been given 14 days to reply, and based on their responses the OFT will make a decision on whether to take further action against the firms or not. Last year the OFT found that some firms may be misleading consumers as to the value of their property and how long they may stay in it after it is sold.