Comments from Phil Martin and The Mortgage Rescue Network regarding the OFT recommendation that SARB should be subject to FSA Regulation.

http://www.oft.gov.uk/advice_and_res…nt/saleandrent
http://www.oft.gov.uk/shared_oft/rep…on/oft1018.pdf

The OFT study is both comprehensive and accurate, I have found it extremely enlightening and it reinforced my views on best practise for the sector.

The importance of a tenants’ long term security in the property does need to be addressed.

At the moment, there are many creative ways of offering long term tenure, including covenants, deeds of trust, right of renewals, letters of intent and compensation guarantees, all are restricted however, by mortgage lenders requirements to 6 or 12 month AST’s.

The CML explain that this has been due in part to negative issues surrounding the sector. As regulation occurs and SARB gains credibility, it is likely that lenders will review such tenancy requirements.

I am pleased that the study highlights the pitfalls of a client selling their home in the expectation of rent being paid by HB/LHA.

In truth Housing Benefit regulation 9(1)(h) does exempt Housing Benefit payments, in the majority of cases, from being made to former homeowners for 5 years in the same property.

However, the exceptions to this rule occur when a homeowner was left with no choice but to sell, for example if repossession is imminent or is a future inevitability, or if there is no repayment vehicle for a mortgage ending in the near future.

In SARB it is critical that a landlord checks the tenants’ current affordability and future ability to pay before the transaction takes place.

This makes both compassionate and commercial sense, a property is worth less to a landlord when it is empty or housing a tenant who cannot pay the rent, than if it houses a tenant who is happy to pay the rent each month.

HB/LHA is only one aspect of affordability and sustainability to be considered, I have produced a booklet about Long Term SARB entitled “Sustainable Solutions to Stopping Repossessions” it is available for you to download free at www.propertyinvestmenttips.co.uk/stopping-repossession.doc

I believe that regulation of SARB is necessary, right and appropriate. It will be a massive step forward for all parties.

Private Sale and Rent Back schemes will become more available, more sustainable and a real acceptable alternative to repossession or forced relocation. In addition to this, they will provide an excellent back up to the government and local councils’ Mortgage Rescue Schemes.
They often have to reject applicants due to limited budgets and narrow criteria, leaving a space that private schemes can fill.

Furthermore, regulation of SARB will bring this industry into the mainstream, with this will come support from lenders and commercial financiers, in this manner, we will be able to offer services to a wider audience.

In the intervening period before full regulation, I would urge all active SARB Landords and Investors to join the RentBack Charter Association. In this manner, we will have a united voice and be able to offer better reassurance to our clients. find out more here www.rentbackcharter.co.uk/index.php.

The OFT have said, in the Market Study “For some consumers, however, a sale and rent back transaction may be the best way forward – our research suggests that some individuals find the ability to sell and rent back their own home extremely valuable.”

In truth I feel that Sale and Rent Back can be an excellent solution for some homeowners, but have always believed that it has to be a Long Term Sustainable Solution for all stakeholders.

Phil Martin,
Mortgage Rescue Network