The UK Parliament is considering legislation to bring so-called ‘sale and rent back’ agreements within the scope of the Financial Services Authority (FSA) regulation. These deals occur when a firm approaches an underwater borrower and offers to purchase the distressed asset. In return the resident gets to rent the property for an extended period, with the option to repurchase in the future. Critics claim that often residents are left out in the cold as missing one’s month of rent is reason for eviction. Proponents say the initiative helps keep owners in their homes, at a price they can afford; an important option considering rents in the UK’s major cities are not falling dramatically as demand stays high. Nonetheless, the government suspend operations in this market in May after the Office of Fair Trading (OFT) issued a report identifying a number of risks to homeowners entering into these arrangements. “The Office of Fair Trading found last year that vulnerable homeowners were at risk from unscrupulous sale and rent back operators,” explains Chief Secretary to the Treasury, Yvette Cooper. “It’s not right that people can be pushed out of their homes through dodgy deals.” The OFT report recommends compulsory regulation, increasing consumer awareness and improving information about housing benefits, as a way to ensure sale and rent backs are fair. The FSA will publish shortly details of its regulatory regime, which will take effect on July 1, 2009, subject to Parliamentary approval. Write to Jacob Gaffney.

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