What is a sale and rent back scheme?
If you’re having difficulty paying your mortgage, one option available to you would possibly be a sale and rent back scheme by a personal firm. These schemes also can be called repurchase or sale and lease back schemes.
A sale and rent back scheme operated by a personal firm allows you to sell your home to the firm then rent it back from them as a tenant. Typically, you would sell your home to the firm at a reduced price. a personal firm can mean a corporation , a broker or a private individual.
These schemes are operated differently from mortgage rescue and homelessness prevention schemes which some social housing landlords may put forward to you.
You need to be particularly careful about signing up to a purchase and rent back scheme operated by a personal firm as they will pose risks. You would like to know exactly what you’re signing up to and the way this might affect your housing and financial situation within the long-term.
It’s best to only consider using these schemes as a final resort.
Rules sale and rent back firms must follow
There are strict rules that sale and rent back firms need to adhere to. These are designed to offer you better protection and mean that firms:
- aren’t permitted to post promotional leaflets through your letter box
- must check you’ll afford to enter into an agreement with them and the way which it may affect your entitlement to benefits
- must offer you a hard and fast term tenancy of a minimum of five years
- will arrange for an independent valuation of your home if you haven’t already got one
- must offer you a cooling-off period of 14 days to offer you longer to make a decision what to try to do
Sale and rent back schemes are overseen by the govt financial watchdog, the Financial Conduct Authority (FCA). This means the FCA checks whether firms stick with all the principles and makes sure that they meet certain standards. It also means there’s a complaints procedure you’ll undergo if things fail.
If you’re brooding about signing a purchase and rent back agreement with a specific firm, you ought to make sure the firm is listed on the Financial Services Register. you’ll check the register on the FCA’s website.
Things to watch out for with sale and rent back schemes
As private sale and rent back schemes are often risky, you ought to only sign up to one if you’ve got no other options. If you’re brooding about signing up to a personal sale and rent back scheme, you would like to see the terms and conditions of the scheme very carefully. Here are some things to watch out for:
Check the worth you’re being offered
Sale and rent back firms usually purchase homes below market value so you’ll find yourself losing money. You would possibly be happier selling your home on the open market and finding elsewhere to rent. This is able to mean you’ll make more out of the sale and will use this to pay off the other debts you would possibly owe.
You should even be aware that if the worth you’re being offered to sell your property is a smaller amount than what you owe on your mortgage, your mortgage lender can refuse to allow you to sell it at that price.
You could still get evicted
– Signing up to a personal sale and rent back scheme doesn’t always stop you from having to go away your range in the long-term. you would possibly still get evicted if:
– you go against any of the terms of your tenancy agreement like falling behind with the rent payments
– your new landlord gets into financial difficulties and your house is repossessed
When you engage in a personal sale and rent back scheme, it’s likely that your home ші going to be rented back to you on the idea of a hard and fast term tenancy. When the fixed term tenancy involves an end, it’s usually very easy for your landlord to evict you, albeit you’ve done nothing wrong.
Your entitlement to benefits could also be affected
If you sell your home but still live there and pay rent, you’ll not be entitled to Housing Benefit.
Your entitlement to other means-tested benefits, like income-based Jobseeker’s Allowance and income–related Employment and Support Allowance, can also be affected.
You should consider getting independent financial advice. This may help to ensure you’ve thought carefully about how signing up to a purchase and rent back scheme will affect your financial and housing situation within the long run.