A new investigation by Which? Money has uncovered woefully inadequate advice in the sale-and-rent back (SRB) market.
Which? found that, of the 17 advisers across nine firms contacted by researchers about SRB (when a company buys your home and rents it back to you), just two offered acceptable advice.
Seven advisers failed to discuss whether SRB was the right option for the customer, with six of these going on to give quotes.
One adviser gave a quote that would not have left the customer enough money to pay off their debts – the very reason they had given for considering SRB as an option – and at another company, the adviser didn’t even ask how much the customer’s debts were.
Which? Money also found two firms which aren’t on the Financial Services Authority (FSA) register and yet gave our researcher a quote for SRB. We have reported these firms to the FSA.
Which? chief executive, Peter Vicary-Smith, said: ‘It’s simply unacceptable that people are receiving shoddy advice about such a massive financial decision.
‘Not only are regulated firms not doing enough to ensure vulnerable consumers make the right choices, some are offering sale-and-rent-back that aren’t authorised to do so. The FSA must tighten the screw on these firms to make sure the rules are followed and consumers are protected.’
Sale-and-rent-back is usually a last resort for people who are struggling with debt but don’t want to move home.
Most firms offer between 60-70% of the market value of the property. FSA rules mean that SRB firms must offer you a short hold tenancy of at least five years but after that you may have to leave your home. For more on sale-and-rent-back, check out our guide.
The FSA took over the regulation of sale-and-rent-back last summer, when its new rules came into effect. These rules mean that as soon as a customer contacts an SRB company and expresses an interest in selling through SRB, it should explain to them what sort of service it is providing.
It should state whether it is an intermediary and, if so, how many companies it deals with and whether those companies are authorised. It should also discuss how much any fees, commissions and charges are likely to be. The firm should explain this verbally, too, and in writing.
The firms we contacted failed to get even these basic rules right and in only two cases did the adviser explain the firm’s service and send the information in the post.
If you are considering sale-and-rent-back, think carefully before you take out a scheme. If you are in arrears, talk to your lender who might be able to help you arrange payments. It also makes sense to talk to one of the free debt-advice agencies such as Citizens Advice Bureau (CAB) or the Consumer Credit Counselling Service (CCCS).