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Regulation for sale and rent back arrives

Under the new rules, SRB will become a regulated activity and applicants will have to demonstrate they meet minimum standards and are ‘fit and proper’ persons. The regime will require that businesses treat customers fairly, making clear important details, such as the length of time they can stay in the property, before they make their final decision on whether to sell.

The main part of the interim regime is the requirement on applicants to provide a sustainable business plan which shows funding streams and evidence that the funding will continue. More specifically, the FSA will be looking to see that applicants have access to funds in order to complete purchases.

One of the major criticisms of SRB has been the lack of transparency. Therefore, under the new rules, SRB operators will have to guarantee access to an independent valuation. In addition, the consumer must be fully aware of the level of discount being offered and that they understand their beneficial interest in the property will cease upon sale.

John Socha, Vice Chairman, National Landlords Association, speaking about the interim regime, said:

“The clock is now ticking if companies or individuals want to continue with sale and rent back transactions. Ethical sale and rent back must be an option for some consumers. It provides flexible tenure and the ability to remain in their property for those who can no longer afford the costs of home ownership.

“In the current economic climate, more and more people will be facing financial difficulty including keeping up their mortgage repayments. Although sale and rent back will not stop repossessions, ethical sale and rent back could be a way for homeowners to remain in their properties but become tenants. Only when sale and rent back operators are within a more regulated environment can we be confident that consumers will be treated fairly.”

Although the interim regime will be begin from 1 July 2009, the start date of the full regulatory regime is 30 June 2010.

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0 thoughts on “Regulation for sale and rent back arrives

  1. tony altman says:

    its good to see our regulators talking about fairness and transparency Of course these regulations have nothing to do with this. These regulations are designed to force the little people out of sale and rent back and put in the hands of a few large corporations (we wont be suprised to see politicians on the boards of these coporations) once this cartel of a few corporations have a total monopoly of the sale and rent back sector ordinary families will be”taken to the cleaners” No doubt the politicians and regulators will be handsomely rewarded for thier assistance in forcing through these regulations We should be encouraging choice and fairness for families not drafting regulations that discriminate against small busnesses and that are rigged so that only the largest and richest companies could possibly comply with them

  2. Oliver Darraugh says:

    Now that the sell and rent back regulation has started it is expected that less than 10 companies will apply for regulation. This market was dominated by individual investors but the FSA regulation is so strict that only the big companies with massive resources could apply. I guess the regulation has achieved its aim of cleaning this market of the cowboys.