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Press releases 2008 -

Sale and rent back firms need statutory regulation - OFT report

118/08    15 October 2008

The sale and rent back sector needs statutory regulation with better protection for consumers, according to an OFT market study published today.

Download Sale and rent back - an OFT market study (pdf 494 kb).

The OFT report says that:

  • some consumers enter into sale and rent back transactions when this is not the best option for them
  • some sale and rent back firms may mislead customers as to the value of their property or the security they have as tenants. This includes telling people they will be able to stay in their home for years, when in reality the tenancy may only be guaranteed for six to 12 months
  • some firms impose substantial rent increases or even evict tenants after a short tenancy period. It is also possible that tenants may lose their homes if the landlord defaults on the mortgage, and
  • some consumers are evicted because they cannot afford the agreed rent, which suggests staying in their property was not sustainable in the first place.

As a result, the main recommendation of today's OFT report is that there should be statutory regulation of the sale and rent back sector by the Financial Services Authority (FSA). The details of regulation will be up to the FSA to determine but the OFT considers it should include:

  • an obligation on sale and rent back firms to be more transparent about the initial valuation and sale price, the terms of the tenancy and the amount of rent to be paid. In particular, firms must offer forms of tenancy that match the assurances they give to customers, and
  • a requirement on firms to tell consumers about the free, independent advice available to them before they decide to sell.

Regulation may also require firms who fail to honour their commitments to offer redress to consumers.

John Fingleton, OFT Chief Executive, said:

'Our research shows that sale and rent back deals have potential to cause serious and permanent harm to often vulnerable 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 rent back firms looking to make a deal.

'Even those customers for whom sale and rent back might be the best option could be unaware they are currently bearing almost of all the risks.

'Recommending statutory regulation is not something we do lightly or often, however in this case we consider it necessary to put a stop to the unacceptable behaviour of some sale and rent back operators and to ensure consumers are better protected.'


1. Sale and rent back is a relatively new type of property transaction whereby firms buy homes from individuals, usually at a discount, and then allow those individuals to stay on in the property as tenants.

2. There is little reliable data on the size of the industry. However it is likely that there are upwards of 1,000 firms, together with an unknown number of non-professional landlords, who have conducted about 50,000 transactions to date.

3. During this short market study, the OFT looked at the characteristics of the sale and rent back product, the circumstances in which these products are sold and considered whether existing consumer protection legislation is sufficient and effective. This included contact with trade bodies, consumer groups, industry bodies, government, sale and rent back providers and individual consumers.

4. OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows a market-wide consideration of both competition and consumer issues.

5. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers who are concerned about whether sale and rent back is the right product for them should seek independent advice. They may wish to contact an organisation such as their local Citizens Advice Bureau. Consumers who are concerned they have been unfairly treated by a company offering sale and rent back can contact Consumer Direct (tel: 08454 04 05 06 or visit the Consumer Direct website.

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