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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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Article Published/Sorted/Amended on Scopulus 2009-06-04 01:28:08 in Business Articles

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