The Council of Mortgage Lenders and Citizens Advice support the Office of Fair Trading's new recommendation today that sale and rent back transactions should be regulated by the Financial Services Authority.
The conclusion is the outcome of an OFT market study prompted by the concerns of the CML, Citizens Advice and Shelter, among others.
The OFT's recommendation is very clear, but the Government will now need to decide whether to accept the recommendation and bring forward specific regulatory proposals. The OFT believes this could be achieved relatively quickly and the CML and Citizens Advice would like to see prompt implementation. While further consultation on specific proposals would be necessary, both organisations strongly support the general direction outlined by the OFT.
CML Director General, Michael Coogan, commented: "It is a year ago that the CML, Shelter and Citizens' Advice first jointly called for the regulation of the sale and rent back sector. The OFT recommendation potentially brings regulation a step closer. In the meantime, there has been some progress towards improved transparency for consumers through voluntary measures, but a level playing field requires a regulatory approach to ensure appropriate protection from unscrupulous operators for consumers who may be in a vulnerable situation."
Citizens Advice Chief Executive, David Harker, commented: "Citizens Advice warmly welcomes the findings of the OFT's market study. We have seen cases of very severe problems arising from bad practices connected to sale and rent back agreements. These are long term agreements about people's homes so when sale and rent back goes wrong people can suffer huge financial and emotional loss. While sale and rent back agreements might be the right thing for some people, consumers need the sort of robust and binding safeguards that only statutory regulation is likely to provide.
"With more people seeking advice about mortgage arrears we are concerned that these safeguards should be put in place as soon as possible. Therefore we urge the government to act on the OFT recommendations without delay. In the meantime we call on the reputable businesses in the sale and rent back sector to develop rigorous standards of conduct in the way that sale and rent back agreements are sold and managed."
The National Landlords Association (NLA), the leading representative body for private-residential landlords, remains committed to further raising standards among landlords operating in the sale and rent back sector.
Responding to the Office of Fair Trading (OFT) Market Study on sale and rent back recommending the need for statutory regulation by the FSA, the NLA is pleased that the OFT has come to a similar conclusion: that something had to be done about sale and rent back.
The NLA has recently consulted across the sector about a Code of Practice aimed at encouraging transparency and openness for sale and rent back transactions. The OFT study means there is now recognition that ethical sale and rent back has a place within the housing market. The NLA will support any steps to drive out ‘rogue' operators from the private-rented sector.
David Salusbury, Chairman, NLA, said: "Although the OFT has moved directly to FSA regulation, it does not affect the NLA commitment to doing what it can to assist cleaning up this market. The NLA will offer its full assistance to the Government and the FSA as they consider the implications of the OFT report.
"As we have said all along, people's homes are not like other commodities and some of the questionable practices that have come to light through the OFT's investigations have left some consumers even more vulnerable than before. But it must be remembered this is not the whole picture. We believe the majority of sale and rent back landlords act with professionalism and integrity. A small number of ‘rogue' operators have now brought the entire market under close scrutiny.
"The NLA called for change and the OFT report is an answer to that call."
Donna Werbner, Property Expert at money website Fool.co.uk, says: "Misleading, harmful and unacceptable is exactly the right way to describe these schemes - so hats off to the OFT for finally acknowledging this.
"Fool.co.uk has been calling for regulation of these schemes for over 10 months now1. Following the OFT's damning report, we call on the Government to bring in legislation to better protect homeowners and ensure these schemes cannot continue to operate completely unregulated.
"It's time to act now, before more vulnerable people are put at risk - it is essential these people are protected by legislation."
