Sell and rent back housing
is causing something of a stir.
The phenomena involves
selling your home to a third party, but then going
on to rent
it. You don't move out. At least not right
Effectively the former
homeowner becomes a tenant.
This kind of arrangement has become more popular over the last
five years. And so with its rising popularity, the
number of professional property buying companies has
Homeowners see "renting
back", as one way of getting
immediate access to the cash tied up in their house.
Others are looking to reduce their monthly
outgoings. As you might expect (ultimately) there's usually a financial reason for
going this route but the "trigger" could be some or
any of a hundred and one different things.
So far so good.
But sell and rent back
housing isn't popular with everyone. Certainly not
estate agents. Properties which become rent back
housing are not sold through estate agents. Rather
the homeowner sells their home directly to a
professional cash property buyer.
And with the number
crunchers telling us repossessions are running at
record levels and millions of homeowners
experiencing or about to experience interest "rate shock", the press is naturally curious about it.
Sell and rent back housing in the press
A recent BBC piece
Stretched homeowners eye rental option
featuring quotes from two or three established
property buying companies was partly a call to
action ("the industry should be regulated"), partly
a PR piece for the companies involved and
partly a warning to homeowners to be circumspect. A
piece in the FT around the same time
to keep the roof over your head was not
The pros and cons of sell and rent back housing
It is irresponsible to
ignore the pitfalls of sell rent housing.
The sector is not currently regulated. It
should be. Regulation will come. The industry needs
to be prepared for and accept scrutiny and any "bad eggs" exposed.
There are a great many small
companies, and a few national homebuyers (mainly
franchises). Ultimately you're likely to be dealing
with an individual property buyer.
When you move into the rent
back sector it's not unlike
marriage. Or indeed, weighing up a potential business partner. You have to find a house buying company
you're compatible with. If you're not on the same
wavelength - forget it. It's inevitable, no matter
what paperwork's involved, that sell and rent back
housing involves some degree of trust.
The vast majority (but not
all) professional homebuying companies want to
re-sell a property within five years. By itself,
there is nothing improper in this.
Each property buying company
will have it's own buying and selling criteria. All
businesses need rules. And just like people, some
are more flexible than others. But what the press is hinting
at is that you may think you have agreed one thing..only to find yourself out in the street
somewhere down the line.
Like any financial
arrangement you must take proper safeguards. This
includes clarifying the length of the agreement in
future rent levels and so on. If you're after
something specific you must ensure any sell and rent
back housing meets your criteria.
But, and it's a big but, if
you're looking for a "lifetime" arrangement or an
agreement which covers at least X years you must
make this clear and if necessary get appropriate
safeguards written into the contract regardless of
the short term nature of the tenancy agreement
you're not getting what you want in black and white,
move on. Likewise, future rent increases. And should
the property need to be sold find out if the buyer
is taking any
responsibility for finding you similar alternative
accommodation or offers a sensible buy-back option.
Homeowners in receipt of
benefits also have a need to be cautious. It's
important to make a thorough assessment of what the
sell rent option means for your future benefit
entitlement. If you live in an ex-council property
you may have to find out whether you have to
pay back any of the discount you received when you
bought your home. A Northern Ireland Housing
Executive news release
on the pitfalls of sell and rent back housing,
although specific to Northern Ireland, covers this
You also need to consider the
longer term implications of opting out of the
property market. Once off the property ladder it
might be very difficult to get back on again. This
may not be of concern to older homeowners but could
or should be for others.