Sale and Rent Back Scheme / Mortgage Protection

Sale and rent back schemes

Sale and rent back is a new type of property transaction where firms buy homes from individuals and then allow those individuals to stay on in the property as tenants. These are often sold to people in multiple debt. The firms usually pay off the debts and purchase the home at a significant discount.

What are the pitfalls?

In the current credit crunch, the number of people experiencing financial difficulties is rising. This is likely to increase demand for sale and rent back. Our experience of dealing with customers who have gone through a sale and rent back scheme is that there are a number of issues that should be considered before entering into this type of scheme. These are:

• some customers are entering into sale and rent back transactions when this is not necessarily the best option for them
• the property is bought well below the market value
• little time is given for the householder to seek advice or consider the options
• housing benefit may not be paid following the sale of the home
• the tenancy usually granted is an assured shorthold tenancy for 6 months
• the rent can be increased significantly at the end of the 6 months
• the landlord can have difficulties with their mortgage on the property which could result in being repossessed by the lender

What can you do?

Get informed.

Further information about the Sale and Rent back scheme is available.

If you are in arrears with your mortgage, further information is also available.