Sale & Rent Back

What is Sale and Rent Back?

It is an agreement that allows a homeowner to sell their property, quickly, to a company and rent back the home, (usually at a discounted price of around 60% 70% of market value). The vendor then becomes a tenant, renting the property from the company, (usually at market rates).

Benefits of Sale and Rent Back

Despite the obvious downside of selling your home at typically less than market value, it is an option for homeowners in extreme financial difficulties, e.g. facing repossession due to mortgage arrears or other unforeseen circumstances, a lifeline and a fast solution.

Advantages of entering into an agreement include:

 the opportunity to continue living in the property;
 a fast service, often exchanging contracts within 24 hours and completing within 7 days;
 flexibility, to use the freedup cash to pay off outstanding debts;
 usually no upfront fees, e.g. property valuation or solicitor’s fees, (companies vary, however, so do check any setup costs, carefully, before signing the agreement
 rental costs can be less than previous mortgage payments;
 discretion – your neighbours or family need not know about your financial problems;
 the option, with some companies to buy the property back, at a later date.


The Down Side

Some of the drawbacks you must know, including:

 lack of regulation in this market resulting in some companies offering much better deals than others, although this has been less of a problem than in recent years;
 properties tend to be undervalued by the purchasing company;
 if you’re very unlucky, you could end up homeless with the new owner evicting you as soon as 6 to 12 months after signing the agreement; (most companies, however, abide by professional landlord practices that encourage longterm tenancies).

Consumer Protection

The OFT (Office of Fair Trading) has recently called for greater protection for the growing number of consumers selling and renting back their homes in a last ditch attempt to avoid repossession. Amongst its recommendations, the OFT includes statutory regulation of the providers and an obligation for greater transparency, across the sector.

Important Questions about Sale & Rent Back Agreements

Not companies will explain the risks associated with the agreements. It is important, therefore, that before signing on the dotted line you ask for clarification about any concerns you may have including:

 What percentage of market value will I receive for my property?
 How much rent will I pay and can the rent be increased during my tenancy?
 What are the terms of the tenancy, e.g. how long can I stay in the property; can you sell the property to a third party during my tenancy; does the agreement include property maintenance and building insurance cover?