Sale and rent back schemes run by private firms
This information applies to Scotland only
The Financial Conduct Authority (FCA) is one of the government's financial watchdogs, responsible for making sure sale and rent back firms follow the rules. The FCA has found many serious problems with those firms. As a result, almost all firms have now stopped offering new sale and rent back schemes. You should therefore look at all your other options first. Go back to How to sort out your mortgage problems.
What is a sale and rent back scheme
If you're struggling to pay your mortgage, one option you could think about is a sale and rent back scheme run by a private firm. These schemes may also be referred to as 'buy back' or 'sale and lease back' schemes.
A sale and rent back scheme run by a private firm allows you to sell your home, typically at a reduced price, and then rent it back from the firm as a tenant. A private firm can include a company, a broker or a private individual.
These schemes are different from mortgage rescue schemes run by social landlords. For more information about mortgage rescue schemes run by social landlords, see Mortgage rescue schemes.
There are a number of risks associated with sale and rent back scheme schemes run by private firms, so it is best to consider them only as a last resort. You need to understand exactly what you could be signing up to, and how a scheme could affect your housing and financial situation in the long-term.
If you’re having serious difficulties paying your mortgage, for example, if you’ve started getting letters from your mortgage lender threatening court action, you should get help from an experienced debt adviser straightaway.
You can get debt advice from a Citizens Advice Bureau - where to get advice.
How sale and rent back schemes are regulated
The Financial Conduct Authority regulates sale and rent back schemes. This means that it monitors how private firms provide and sell them, and ensures that the firms meet certain standards. It also means that you will have access to a complaints procedure if things go wrong.
You can check if a firm is regulated by checking the FCA register. Details of the FCA consumer helpline and how to check the register are available from the FCA’s website at www.fca.gov.uk.
There are strict regulations that sale and rent back firms have to follow. These regulations are designed to give you better protection and include:-
- stopping firms from dropping promotional leaflets through letter boxes
- making firms check that you can afford to enter into an agreement and how it might affect your entitlement to benefits
- giving you a fixed term tenancy of at least five years
- requiring an independent valuation of your home to be carried out where the valuer owes you a duty of care
- introducing a cooling-off period of 14 days to give you more time to decide what to do.
A useful fact sheet outlining more information about sale and rent back schemes including the risks associated with them, is available from the FCA’s Money Advice Service website at www.moneyadviceservice.org.uk.
Taking care if signing up to a sale and rent back scheme
As there are a number of risks associated with these schemes, you should consider them only as a last resort. It is best to have looked at all other options first.
A sale and rent back scheme may be the right option for you, as long as you check the terms and conditions of the scheme very carefully. You need to understand exactly what you are signing up to, and how this will affect your housing and financial situation in the long-term.
If a sale and rent back scheme appears to be your only option, then take extra care before signing up to a scheme because:
- they typically buy homes below the market rate
- the type of tenancy offered may give you little protection from eviction when the fixed term ends which means that the landlord might be able to evict you quite easily
- you could still be evicted if you breach the terms of your tenancy agreement, for example, if you fall badly behind with the rent payments
- if your new landlord gets into financial difficulties, your home could still be repossessed and you could be evicted.
You should also bear in mind that if you sell your home but continue to live there and pay rent, you may not be entitled to Housing Benefit.
For more information about Housing Benefit, see Help with your rent – Housing Benefit.
If you are thinking about signing up to a sale and rent back scheme with a private firm, you should get advice from an experienced adviser, for example, at a Citizens Advice Bureau - where to get advice.
You may also want to think about getting independent financial advice. This will help to make sure you've thought carefully about how signing up to a sale and rent back scheme will affect your financial and housing situation in the longer term.
You should also make sure you understand what tenancy agreement you have. For more information about your rights as a private tenant, see Renting from a private landlord.
More information about mortgage problems
For more information about how to deal with mortgage problems see:
- How to sort out your mortgage problems
- Schemes to provide support to homeowners in danger of losing their homes.
On the Shelter Scotland website
Go to scotland.shelter.org.uk.
Money Advice Service
Independent financial advice
If you're thinking about signing up to a mortgage rescue scheme, you should get independent financial advice. The following organisations can help you find an independent financial adviser:
Independent Financial Promotions (IFAP)
Institute of Financial Planning (IFP)
Personal Finance Society (PFS)