The Government will begin to regulate the sale and rentback market, meaning it will crack down on any sharks looking to buy up indebted people's homes and then evict them.

Sale and rentback is a system where people who cannot afford to hold onto their house sell the property to a company, who then allows them to pay rent to stay in the property. Unfortunately this has been abused, and many people have had their homes effectively stolen away from them. The Financial Services Authority has published the details of the regime that it aims to introduce on July 1 to tackle immediate problems for customers in this market.

This follows the recommendation made last year by the Office of Fair Trading, following a market study which found that sale and rent back deals had the potential to cause serious harm to homeowners who are often already in a vulnerable position.

Ed Harley, FSA head of mortgage policy, says: "We know that some consumers enter into sale and rent back arrangements without understanding the costs and risks involved. This can be a source of real distress for people in already difficult circumstances. Firms entering our regime will need to run their business in a way that means customers are treated fairly. This includes making clear to customers important details, such as the length of time they can stay in the property, before they enter into the arrangement."

Under the new regime, firms will need to meet FSA threshold conditions including the requirement to have adequate resources and to be run by fit and proper people.

Peter Tutton, Citizens Advice social policy officer says: "We have seen where the sale and rentback sector has caused considerable detriment in the past. While sale and rentback agreements might be the right thing for some people, Citizens Advice Bureaux have reported numerous cases where bad practice has resulted in people losing both substantial sums of money and where they were not permitted to remain in their home in the longer term, finding themselves homeless within a year.

"This will provide much needed protection for consumers, stop cowboys and provide controls on who can provide these agreements and what they can do."

SOURCE: FSA, Citizens Advice, 03/06/09

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