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Midland homeowners warned as sale and rent back regulations are tightened

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Justin Parker, partner and property specialist at Midland law firm mfg Solicitors, stresses the need for homeowners entering into ‘sale and rent back’ agreements to be ‘vigilant’ despite the government tightening its regulatory grip.

Latest government alterations relating to sale and rent back (SRB) agreements have been billed as the way to close loopholes and protect toiling homeowners. In short, any individual or business who now conducts an SRB transaction must be fully vetted and authorised by the Financial Services Authority (FSA).

For the thousands of Midland homeowners who are struggling to keep up with mortgage arrears, an SRB agreement is a seemingly short-term financial advantage whereby they surrender the equity of their property, but with the sale delayed, are allowed to remain in the home as a tenant for a minimum of five years.

These products are widely promoted by financial marketing men as ‘Lease Options’ or ‘Exchange with Delayed Completion’ arrangements.Yes, to some it’s a quick and appealing injection of cash – but at what price?

An SRB agreement is, more often than not, on unfavourable terms. Many fail to understand that frighteningly, homeowners will be offered around 30 per cent less than the market value of their property as part of any deal. So the need to be vigilant is crucial.

The game of cat and mouse between homeowners and rogue firms who offer these seemingly ‘golden deals’,is unnerving. The latest Westminster changes make it trickier for these rogue firms to regulate themselves with the FSA in accordance with the guidelines – but as ever, some will slip through even the most tightened loopholes- meaning homeowners across the region could still be financially exposed with no concrete protection.

There is no doubt ministers and civil servants had homeowners in the forefront of their policy-making thoughts and equally, property owners are seeing signs of an uplift. But these complex agreements still carry a health warning – risks which mean thousands of recession-hit Midland homeowners must be on their guard – both financially and legally – from slick financial sales people who promise the world, but deliver something very different.

If you are considering entering into a complex SRB agreement, then the Kidderminster-based property department at mfg Solicitors can advise on the agreement, the detail and vitally, the pitfalls.

For further details or advice, readers can call Justin on 0845 55 55 321 or email [encode_email email=”” display=””].