Do’s and Don’ts

Nia Williams

November 17, 2008

Many “Sale and rent back schemes” involve a company buying your client’s home for significantly less than the market value, and then allowing them to continue living in the property, but only by paying full market rent and often with only an assured short hold tenancy agreement. There are no guarantees that they will be able to stay in the property long term.

Research conducted by SHIP into the sale and rent back market revealed evidence of misleading claims and advertising by some companies, including portraying themselves as equity release.

Commenting on the issue, Andrea Rozario, director general of SHIP, said: “Whilst we acknowledge that there may be some ethical sale and rent back companies, we are concerned about the number of providers who are making misleading claims in their advertising. We have devised this checklist to help consumers and advisers of some of the key risks and implications of these products and also their rights in order to make an informed decision.

“For the avoidance of doubt there is no comparison between regulated equity release schemes, with which consumers have the full protection of the FSA in addition to the safeguards implemented by SHIP, and the non-regulated sale and rent back sector. The two main differences consumers should take note of are:

* Security of tenure: all regulated equity release products give policy holders the right to live in their homes for life; and

* No monthly rent: equity release schemes do not require regular payment from Policyholders.”



• If your client has an existing loan, speak with their lender if they are having problems meeting their monthly repayment.

• If your client is having trouble with debt, advise that they speak with an organisation such as the Citizens Advice Bureau (CAB), Payplan or the National Debt Helpline before they do anything else.

• If feasible do consult your client’s family about their intentions, or make sure that they do.

• Check out the company you or your client are thinking of using. Are they regulated by the Financial Services Authority (FSA)? If not, your client may not have rights to redress if things go wrong and they could end up evicted if the company goes bust.

• Check the type of tenancy agreement your client is being offered. Many sale and rent back schemes offer very little security. Your client will be better off with a lifetime lease (or a minimum of 21 years) as opposed to an assured shorthold tenancy agreement which will offer no security of tenure and may result in a higher rent being charged at the end of the initial 6 months or, worse, eviction.


• Forget to think about your client’s future financial, family and life plans along with any ongoing commitments.

• Don’t be pressurised – if in difficulty with debt, speak with the companies your client owes money to sooner rather than later.

• Don’t forget that the monthly rent is a commitment your client may not be able to keep up, and that the amount of rent is likely to increase in the future. There is no guarantee your client will get housing benefit to cover this rental cost, no matter what the sale and rent back company says.

• Don’t forget to check if your client is eligible for any state benefits or grants from the Department of Work and Pensions and their local council.

• Don’t assume everything your client is being told is correct, get it checked out and don’t rush into any agreements.

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