The Office of Fair Trading is calling for the Financial Services Authority (FSA) to regulate sale and rent back providers due to the risk of “serious and permanent” consumer detriment.
An OFT report into the sector concludes that some sale and rentback providers may mislead consumers over the value of their property and the security they have as tenants.
It found that some providers raise tenants' rent or evict them after a short period and there is also a risk of the landlord defaulting on their mortgage, leading to the tenants being evicted.
The OFT says the FSA should require firms to be more transparent about the property valuation, terms of tenancy and rent, as well as honour the assurances they give to clients. The OFT says rent back firms should also tell customers about free independent advice available to them and pay redress where they fail to meet commitments.
OFT chief executive John Fingleton said,
“Our research shows that sale and rent- back deals have the potential to cause serious and permanent harm to often vulner-able homeowners.
“The unfamiliar and highly pressurised situations that these people find themselves in may leave them particularly vulnerable to misleading statements or valuations from sale and rentback firms looking to make a deal.”
Safe Home Income Plans and Norwich Union have both backed the OFT's suggestions.
Safe home Income Plans director general Andrea Rozario said,:
“We are not surprised by the OFT's findings and we believe the ethical companies in the field will probably also welcome this recommendation.”
Norwich Union head of marketing for post retirement products Anthony Rafferty said,
“We urge the FSA to implement regulation upon the sector in order to shield consumers from the possible risks that these schemes could bring about.”