FTAdviser.com

OFT launches investigation into sale and rent back sector

Story by: Sharon Flaherty
Magazine: FTAdviser
Published Wednesday , May 14, 2008

The Office of Fair Trading (OFT) has launched an investigation into the sale and rent back sector, to consider whether current consumer protection legislation is sufficient.

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Sale and rent back, also known as sale and lease back, involves individual homeowners selling their property at a discount in return for the option to remain in the house as a tenant.

These arrangements are often taken up by consumers in financial difficulty facing possible repossession of their homes.

Given the current economic climate and the fact that repossessions are on the rise, the OFT believes that this market study is of crucial importance. (See recent repossessions story.)

The OFT said it intends to take a detailed look at the characteristics of the sale and rent back product and the circumstances in which these products are sold to consider whether existing consumer protection legislation is sufficient and effective.

John Fingleton, OFT chief executive, said: "Sale and rent back schemes might be helpful for some consumers but there are a number of potential concerns including whether consumers in difficult circumstances are making well informed choices.

"We are therefore prioritising this work to take a good look at whether consumers are adequately informed and protected."

The OFT will be contacting key parties directly but other interested parties can submit written reviews to the OFT office. The investigation aims to be completed by September 2008.

Commenting on the OFT decision to investigate, Adam Sampson, chief executive of Shelter, said the investigation is urgently needed.

"These companies encourage hard-up homeowners to sign up for what is plainly a very bad deal," he said.

"Shelter has seen cases where homeowners have not only lost out financially after selling their homes to an sale and leaseback company, but also lack any right to permanently stay in their home and ultimately find themselves homeless."

Shelter has already called on the government for regulation in this sector.

"We hope the OFT study will offer the public improved protection against the hidden dangers of some schemes and ensure all sale and leaseback companies operate in best interests of consumers," Sampson added.