There are growing concerns and dangers associated with sale and rent back schemes for individuals, who are in financial difficulty and wish to remain in their homes. Now one home reversion plan arranger has raised concerns that many of these unregulated companies are preying on some of the most vulnerable members of society, retired people with inadequate pension provision, but who still own their own home.
Sale-and-rent-back property schemes have been branded 'a disaster waiting to happen' by one of Britain's leading charities.
Citizens Advice has called for official regulation of firms that buy the homes of people at risk of repossession at knock down prices before renting them back. It said some companies are paying less than 60% of homes' values with no guarantee that the previous owners will be able to remain in their property beyond a standard six to 12-month rental period.
Peter Tutton, of Citizens Advice said: 'We've got people who are vulnerable trying to stay in their home being enticed into an industry that has no controls on it at all at the moment and that is a disaster waiting to happen.
'Unless something is done to bring this industry into some kind of regulation to get some sort of framework of quality and assurances for people entering into these agreements, the kind of security tenure they're going to get, what they are paying and what protection they get against things going wrong, we could see a lot more people really finding they are losing out lots of money and still losing their homes.'
Unlike equity release firms, sale and rent back schemes are not regulated by the Financial Services Authority.
The number of companies offering sale and rent back schemes has mushroomed over the past 18 months, with many advertising heavily in local and national press and online.
While some firms are large organisations offering certain guarantees, many are small operations looking for increasingly rare bargain buy-to-let purchases.
Most sale-and-rent-back operators offer no rental guarantees beyond a standard Assured Shorthold Tenancy and former homeowners could find themselves evicted within six or 12 months.
The equity release industry has sounded warnings about sale-and-rent-back amid fears that cash-strapped pensioners could fall victim to unscrupulous schemes.
If you are considering this type of scheme to boost you retirement income, or just to repay your loans or mortgage, in the first instance you should contact an independent financial adviser (IFA) with specialist knowledge in this area. They will be able to ascertain your current situation, taking into account your tax status and any state benefits which may be available to you and make appropriate recommendations from the whole of the market as to which is the best scheme to suit your particular needs. You can obtain a list of local IFAs from the FSA website at http://www.fsa.gov.uk/
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