A recent crack down by the Office of Fair Trading (OFT) has put a number of sale and rent back firms on the back foot. Twelve such companies have had to change the wording of their advertisements or have removed their websites from the internet. These companies typically offer a swift purchase from struggling home owners and then allow them to rent the property. The catch being that the homeowner is given only around 70-80% of the market rate in exchange for the quick sale and being allowed to stay in their home.
The OFT have targeted firms who were making claims that included customers being allowed to stay in the property for life, guaranteed low rent and being able to buy the property back at any time. Long running concern over the industry finally led to a date being set for its regulation on 1st July next year, by the Financial Services Authority (FSA) and the OFT’s action has lead on from this.
There has been some concern that vulnerable home owners were being misled by some of these companies and industry insiders have said that many turning to this eventuality have never tried to sell their properties on the open market, where they would achieve a higher price. Heather Clayton, Senior Director of Consumer Protection at OFT said: “The unsubstantiated claims used by some sale and rent back firms have been particularly concerning since they were targeting consumers suffering financial difficulties and at risk of losing their homes. We are pleased that these firms have agreed to change or remove their advertising.”
Propertysaleforcash.com, myhomerescue.co.uk, uksaleandrentback.com, skpropertysolutions.com, fullhouseuk.com, and quicksalefast.co.uk have all taken down their websites following the OFT probe. A further three firms have amended their websites; sell-quick.co.uk, nationalpropertybuyers.co.uk and quickpurchase.co.uk. N-and-b-property-buyers.co.uk, sell-your-house-quick-help.com and rapidhomesale.org no longer offer a sale and rent back service.
The sell and rent back market has certainly been flooded with opportunists since the economic downturn, resulting in threats to consumer interests and the potential to be exploited by unscrupulous businessmen. Many have been keen to build up property portfolios after seeing the industry as a vehicle in which to pick up properties for below market values. Without regulation, the industry has been open to abuse with a lack of controls to protect consumer interests.
Reputable firms have been quick to welcome the move towards regulation by the FSA. Jason Shaw at MPG Investments, one of the industry leaders, said: “The industry in general has suffered a reputation problem, after opportunists began moving away from the buy to let market. Unfortunately, this meant that a number of individuals and small companies sought to exploit debt in a way that should never have been considered acceptable.”
Whatever public opinion about sale and rent back companies, it looks like they’re here to stay. Often portrayed as predators and branded ‘vultures’ by charity Shelter, it can be argued that the more reputable amongst them provide a public service by lifting debt worries from home owners shoulders and letting them stay in their homes – albeit at a price. Regulation will hopefully remove the chancers and go a long way to improving the industry’s reputation.