Sale and Rent Back Regulation

From the first of July, UK landlords have just one month to prepare and submit their application for permission to continue operating ona sale and rent back basis.  Under new regulation, sale and rent back will become a fully regulated activity and will only be able to be performed by people who meet the FSA fit and proper person requirements.  This is to counter a lack of clarity in the sale and rent back model.

The FSA is bringing in guidance to ensure landlords dealing in sale and rent back are clear to their tenants about the length of time they can stay in the property before a sale decision is made.

SRB applicants must also prepare a detailed business plan showing how the income of the model will work and providing reassurance that funding will be provided.  Landlords will also have to show that they have the neccessary funding to make a final purchase.

In addition, the valuation of SRB property, which has been a major issue will have to be done through an independent valuation, even though this can be arranged by the landlord.  The level of discount applied to the valuation must be clear to the customer too.

Some promoters of sale and rent back argue that the regulation is heavy handed and that their schemes offer people the opportunity to stay in a property where no other options exist.

Full regulation of this activity by the FSA is due to start next June.