“Sale and Rent Back” Demise Welcomed by IVA Advice Providers

IVA Advice Forum is pleased to confirm that the Financial Services Authority has acted against the “sale and rent back” sector after discovering widespread problems. “Sale and Rent Back” enabled a homeowner to sell a home that may otherwise be in jeopardy with a view to then becoming a tenant in the property. IVA Advice Forum reports that such schemes were often used by those facing mortgage arrears along with other connected debt problems.

The problems with sale and rent back schemes have been numerous and serious. Properties were typically sold at a substantial discount to market value, few guarantees of an extended tenancy were commonly provided, and in some situations the purchaser of the property failed to pay the mortgage leading to the tenant being evicted. One sale and rent back firm has even been accused of fraud by a mortgage lender.

The concerns about these schemes extend further in the view of IVA advice companies. The normal debt and IVA advice process is set up to prioritise some types of expenditure including mortgage payments and arrears. By doing so, unsecured debts are treated as a lower-priority, which may then subsequently be dealt with by measures such as a debt management plan or an Individual Voluntary Arrangement. By prioritising the housing situation and dealing with unsecured debts a full solution that can put in place.

By contrast to the IVA advice process, sale and rent back focussed on the property and mortgage situation alone. If a mortgage payment had become unaffordable partly because of the pressure of unsecured debt repayments, replacing a mortgage with rent was unlikely to bring long-term improvements overall. The danger eventually is that mortgage arrears are replaced by rent arrears for as long as correct debt prioritisation is lacking.

Debt and IVA advice has historically been subject to significant regulation from professional insolvency bodies and the OFT. Sale and rent back fell under the remit of the FSA in 2009, since when most firms have pulled out of the market. One of the remaining firms has been put in the hands of the FSA enforcement team and the remaining companies have stopped acquiring customers or have surrendered their permissions.

If you are struggling with mortgage arrears and have considered using a sale and rent back scheme you may no longer be able to find a firm to assist you. This may be a good outcome however. Contacting a good reputable source of debt or IVA advice may improve your chances of retaining your home and dealing with the underlying financial problems that you have concurrently. The IVA Advice Forum can assist also by enabling you to ask questions about your situation anonymously and receive answers from known IVA advice professionals.

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