As the recession deepens, business for sale and rent back (SARB’s) has been on a steady increase. SARB’s involves the sale of a property by a homeowner and then the subsequent rent back by the owner, usually with an Assured Shorthold Tenancy (AST). The purchase price is usually below the market value of the property. The scheme allows homeowners who are struggling financially to relaease monies from the property to pay off debts and, thus avoid repossession.
There have been concerns raised about how these companies operated and, furthermore, homeowners who took part in a SARB scheme did not have protection from the Financial Ombudsmen Service if needed, because the schemes were not regulated.
The Office of Fair Trading (OFT) and the Financial Services Authority (FSA) have alleged that some companies were not clear in ther finer details of the service they were providing. Some have caused confusion for homeowners on the valuation of the property and also about the length of time the homeowner can stay in the property. Some homowners were given the impression that they could buy back their property in the future and there were cited examples where homeowners had been removed from thier homes within 6 months with as little as 2 months notice.
The FSA set out a two stage approach to regulaing the SARB market. On 1st July 2009, an interim regime was brought into effect to address the most immediate problems, followed by a more comprehensive regime which will start on 30th June 2010. Under the interim regime, companies will have to meet the FSA threshold conditions, including the requirement to have adequate resources. Companies that are currently unauthorised and that intend to carry on any of the SARB regulated activities after the interim regime has started will need to apply for interim permission.
The fair treatment of homeowners is very important and the regulations will assist with this. It will be the duty of the FSA to deal with those companies that do not comply with the regulations laid down.
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