6 Potential Pitfalls as a Homeowner of Sell and Rent Back (SRB):
Selling your property through a sale and rent back scheme allows your mortgage debts to be initially cleared and for you to stay in your home. However, you need to keep in mind that if you decide to sign up to such a scheme, you will no longer own your home and could still be evicted if you fall behind with your rent. You might be interested in doing this in order to clear debts on your name or to no longer own a property you have. A list of some of the pitfalls can be seen below:
- The company buying on a Sell and Rent-Back must be FSA Regulated, initial regulations were brought to force in July 2009 due to rogue property buyers. There are still a few companies around doing Sell and Rent Back that are not regulated, check with the FSA register to be certain.
- Sell and Rent Back schemes typically involve individuals selling their home, usually at a big discount, sell and rent back firms may mislead customers as to the true value of their property in the hope of purchasing at a lower price.
- If a private company should go bankrupt after buying your home, the property will or could be repossessed by their lender.
- You will be vulnerable to eviction, as your new landlord will have the right to terminate your tenancy at the end of the fixed term (usually for five years).
- You will have very little security of tenure after the initial fixed term of tenancy, that you agreed on sale, comes to an end. You will also pay market rent and be liable for the usual rental increases in line with inflation.
One of the big issues with Sell and Rent Back is a homeowner might of owned and lived in a certain property for a long time, being the owner there are very few restrictions and any increase in capital appreciation is yours to keep, when forced to sell to a SRB company due to financial difficulties, the homeowner now looses their increase value in Capital appreciation over the years but worse yet they are now a tenant in their own home, meaning they have to abide by the normal regulations within a standard Tenancy Agreement.