FSA Interim Regulation Sale and Rent Back
The Sale and Rent Back Process
Now that the sale and rent back sector has been regulated, each company has prescriptive guidelines, which they must adhere to. This ensures that the consumer is dealt within a consistent manner. However, whilst it is important to remember that the guidelines set out by the FSA ensure that the consumer is dealt with in accordance with the 6 consumer outcomes, it does not prescribe to the provider the purchase price of the agreement or the period the homeowner can remain within the property.
To ensure consistency, there are a number of documents you can expect to receive from the provider of your sale and rent back agreement:
The Initial Disclosure Document (IDD) or the Terms of Business – this sets out the terms of the agreement that the provider is willing to enter into. Initially, it will set out the fact that the provider is regulated by the FSA. It will also include indicative terms of the sale and rent back agreement, including; the purchase price, the percentage of the purchase price against the value of the property, any charges payable, the rent payable and the minimum length of time the seller may remain in the property.
The Initial Offer Letter – this is received after the IDD, and sets out the terms of the agreement, usually following an assessment of the property from the company or individual wishing to buy your property and rent it back to you.
The Final Offer Letter – this is received once your property has been inspected by a RICS (Royal Institute of Chartered Surveyors) surveyor. It will confirm the final details of the agreement.
It is important to remember that not all firms are able to proceed with the sale and rent back of your property in a timescale to suit your needs. They should be willing to complete the purchase as quickly or slowly as you require.
In addition to the above, make sure you are dealing with a company that has gained interim authorisation, will allow you to remain in your property for at least 3 years, charge either none or very low fees, and will allow you to cancel the proposed agreement at any time prior to the completion of the transaction with little or no outlay on your part.
Why has financial services authority (FSA) regulated the sale and rent back sector?
Sell and rent back has been in existence for many years. In the past, there have been a number of cases where companies or individuals have entered into a sale and rent back agreements, promising the owner the opportunity to remain in their property for as long as they wish.
However, the reality in a number of cases is that after a period of six months, the owners have been served notice, evicted from the property, and left homeless by unscrupulous landlords and the property sold at a large profit. In addition to this, there have also been cases where mortgage companies have repossessed the homes of these individuals as the landlords have been unable or unwilling to make mortgage payments on the homes in question.
In response to this, the FSA has taken the step to provide security to those wishing to sell their home whilst remaining in the property for the long term. The FSA have asked all companies and individuals that operate in the sector to apply for ‘interim authorisation.’ From the 1st of July 2009, all companies wishing to continue working in the sale and rent back sector had to apply for this authorisation by the 31st July 2009. Any company not submitting an application by this date is NOT permitted to conduct business in this sector from 1st August 2009.
Steven Martin is a FSA interim authorised provider of Sell and rent back and works at http://www.quickpurchase.co.uk
