Warning against sale and leaseback schemes

A Rochdale house

A report from the Office of Fair Trading calling for a crack down on sale and rent back schemes has confirmed much of what the Advice Service at Rochdale Council has witnessed over the past few years.

The report criticised some firms for misleading customers as to the value of their property or the security they have as tenants. It also found evidence of firms imposing substantial rent increases or even evicting tenants after imposing short term tenancy agreements despite telling people they will be able to remain in their homes long term.

As a result they have issued this stark warning to all homeowners to seek advice before considering this option and be aware of the pitfalls in such schemes.

Homeowners have turned to the Advice Service when their 'quick fix home sales' have turned sour. Steve Bewick, Advice Service Manager said: “This report bears out our experience of these schemes over the past few years. Many homeowners consider this option because they are experiencing financial difficulties, including the threat of repossession.

“We urge anybody in this situation to seek advice. There are strategies and options available to deal with debt which may enable homeowners to hold onto what is likely to be the most valuable asset they are ever likely to own.”

Mr Bewick also stressed that homeowners should be aware of how such schemes impact on a resident’s ability to claim many benefits. As previous owners, residents may no longer be able to claim housing benefits towards rent of the new property. Tax credits and Housing and Council Tax benefits may also cease if residents receive lump sum payments.