CML news & views

The Office of Fair Trading (OFT) is to undertake a market study of the sale-and-leaseback sector. We have been pressing for statutory regulation of the sector and hope that the study will be completed by September – as promised – and acted upon promptly.

Regulation would deliver fairer and more consistent treatment of home-owners that are experiencing problems in paying their mortgage, and might be considering different ways of dealing with the problem.

The OFT will now investigate the market, in which home-owners agree to sell their property – often at a discount – in exchange for a ‘guarantee’ that they can continue to live in their home.

Lenders dealing with home-owners experiencing repayment difficulties are regulated by the Financial Services Authority (FSA). They are bound by the FSA’s mortgage conduct of business rules, as well as its broader requirements of regulated firms to treat their customers fairly. 

Meanwhile, unregulated sale-and-leaseback firms are often already targeting the same home-owners. The quicker there is effective regulation of the sector to provide protection for consumers, the better the safety net for borrowers in financial difficulty will be.

We have a range of concerns about the way some sale-and-leaseback firm operate.  Even though homes may be sold at a discount, stripping out equity when a home-owner may already be in debt, there is sometimes no independent valuation of the property.

Despite the promise that they can stay in their home, former home-owners are usually only offered leases on an assured shorthold tenancy, providing them with little security. There are also concerns about the legal and financial advice they receive, as well as advertising standards. 

Other concerns include a lack of clarity about any option a householder may have to buy back the property, how their entitlement to benefits may be affected by entering into a sale-and-leaseback agreement and what would happen to them if the firm they are dealing with later goes into insolvency.