Steve Brooker, markets expert for Consumer Focus, said:
‘It is great news for users of these schemes that this case has been won. Sale and rent-back customers are at high risk of getting a raw deal, selling at a discount with often only short-term rights to stay in their home. The risks may be even higher in the recession, with few guarantees of what happens to customers if a sale and rent-back company goes bust.
‘There is a lot of confusion about these schemes, as many people think they are protected in the same way as equity release. While interim regulation is welcome, the FSA must ensure robust measures to protect customers are put in place as soon as possible. We would also recommend anyone considering such a scheme seeks independent financial advice and explores other options first.’
ENDS
Notes to editors:
· Consumer Focus is the independent champion for consumers, created from the merger of energywatch, Postwatch and the National Consumer Council (including the Scottish and Welsh Consumer Councils). We are the voice of the consumer, and work to secure a fair deal on their behalf.
Press Association copy:
FAMILY WINS SALE-AND-RENT-BACK LEGAL BATTLE
MONEY RentBack
Jul 9, 2009 12:14:23 PM
By Nicky Burridge, Press Association Personal Finance Correspondent (Corrected repetition: amends court in par 5)
Page 1
A family has won a landmark ruling allowing them to stay in their home after they faced losing it through a sale and rent back scheme, it has emerged.
Paul and Amanda Jackson, who had lived in their property in Shrewsbury since 1984, had entered into a sale and rent back scheme with a company called Repossessions Stopped after getting into mortgage arrears.
They were told by the firm that they could remain in the property indefinitely.
But in 2007, just two years after the arrangement was set up, they received an eviction notice after the company failed to keep up with its mortgage payments on the property.
However, a judge at Birmingham County Court ruled last week that the family could stay in the property for life, with them either taking out a new mortgage and becoming the owners, or through renting the property from the mortgage lender who had repossessed it.
When the parents die, their daughter, who is over 18, can inherit the tenancy, as can their son, if he is over 18 at the time.
Mr Jackson said: “We took that option (sale and rent back) to provide security and safety for our family as we didn’t want to lose the home we had lived in for more than 20 years.
“But when we were served with the eviction notice we felt as if everything was being stolen from us.”
Housing charity Shelter, which brought the case to court on the family’s behalf, said it believed it was the first ruling of its kind.
Shelter’s principal solicitor John Gallagher said: “This is a huge and important victory for not only the Jackson family but everyone who is tempted by these sale and rent back schemes.
“I would urge anyone having mortgage difficulties to seek independent advice from Shelter, a Citizens Advice Bureau or other debt counselling organisations before contacting these kind of companies.”
Sale and rent back schemes enable people struggling to keep up with their mortgage to sell their property to a company and then rent it back again.
But the schemes have come in for heavy criticism following claims that some companies pay less than 60% of the market value for properties, while others levy steep rent increases and some evict people after just
12 months.
In the case of the Jacksons, Repossessions Stopped paid only GBP63,000 for the property, despite it having a market value of GBP100,000.
City watchdog the Financial Services Authority has introduced interim regulation for the sector from the beginning of this month.
The new regime is being introduced in two stages to enable the FSA to offer some protection to vulnerable homeowners as soon as possible.
It was not possible to contact anyone at Repossessions Stopped.
end
