Regulating the sale and rent back market
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Issued 02/06/2009
The Government today laid before Parliament secondary legislation to bring
sale and rent back agreements within the scope of Financial Services Authority
(FSA) regulation. The Government also published a summary of responses to its
consultation on the sale and rent back market, which closed on 1 May 2009. The
FSA will publish shortly details of its regulatory regime, which will take
effect on 1 July 2009 subject to Parliamentary approval.
The Government's consultation followed an Office of Fair Trading (OFT) market
study published at the end of last year, which looked at the impacts of the
growing sale and rent back market. The OFT report identified a number of risks
to homeowners entering into these arrangements and made three recommendations to
Government, including compulsory regulation, increasing consumer awareness and
improving information about housing benefits.
The legislation laid today includes a two-stage approach to regulation, in
order to ensure consumers are protected as quickly as possible in the current
market environment. The FSA will put in place its full regulatory regime in the
second quarter of 2010, following consultation and the publication of its final
rules.
The Chief Secretary to the Treasury, Yvette Cooper, said:
"The Office of
Fair Trading found last year that vulnerable homeowners were at risk from
unscrupulous sale and rent back operators. It's not right that people can be
pushed out of their homes through dodgy deals."
Notes
1. The sale and rent back (also known as sale and lease
back) market offers homeowners the option of selling their properties at
discounted rates in exchange for tenancy arrangements. Sale and rent back
agreements effectively combine two transactions - firstly, individual homeowners
sell their property at a discount, and secondly they are offered an agreement to
remain in the home as a tenant.
2. At Budget 2008, the Government asked the Office of Fair Trading (OFT) and
the Financial Services Authority (FSA) to investigate the sale and rent back
market, focusing on consumers' experience of these arrangements, and consider
options where appropriate to strengthen consumer protections. On 14 May the OFT
announced that it would conduct a formal market study, working to an expedited
timetable in light of stakeholder concerns.
3. The OFT published its report on the sale and rent back market study on 15
October 2008.
4. The Government published its reponse to the OFT market study on 22 October
2008.
5. The Government published its consultation on regulating the sale and rent
back market on 6 February 2009.
6. The FSA published its consultation on the details of an interim regulatory
regime for the sale and rent back market on 6 February 2009.
7. The Government's consulation closed on 1 May. The Government published its
response to this consultation on 1 June 2009.
8. The Government is taking action to support homeowners in difficulty:
*
Statutory regulation of mortgages and credit provides homeowners with important
protections and appropriate means of redress. In 2004 the Government extended
the scope of FSA regulation to cover first charge residential mortgages. The
FSA's regime requires that lenders only move to repossession as a last resort.
Regulation of other credit business is covered by consumer credit legislation,
administered by the Office of Fair Trading (OFT).
* The Government launched
Homeowners Mortgage Support on 21 April. This new scheme, together with changes
announced at Budget 2009 to Support for Mortgage Interest (SMI) and the
Government's Mortgage Rescue Scheme, will help homeowners who experience a
temporary income shock, lose employment, or are otherwise vulnerable, to remain
in their homes. The Government has also taken action to help ensure that every
household struggling with debts has access to free and impartial debt advice.
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