Government to regulate sale and rent back market

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51/09
02 June 2009



Regulating the sale and rent back market

The Government today laid before Parliament secondary legislation to bring sale and rent back agreements within the scope of Financial Services Authority (FSA) regulation.
The Government also published a summary of responses to its consultation on the sale and rent back market, which closed on 1 May 2009. The FSA will publish shortly details of its regulatory regime, which will take effect on 1 July 2009 subject to Parliamentary approval.
The Government’s consultation followed an Office of Fair Trading (OFT) market study published at the end of last year, which looked at the impacts of the growing sale and rent back market. The OFT report identified a number of risks to homeowners entering into these arrangements and made three recommendations to Government, including compulsory regulation, increasing consumer awareness and improving information about housing benefits.
The legislation laid today includes a two-stage approach to regulation, in order to ensure consumers are protected as quickly as possible in the current market environment.
The FSA will put in place its full regulatory regime in the second quarter of 2010, following consultation and the publication of its final rules.
The Chief Secretary to the Treasury, Yvette Cooper, said:
“The Office of Fair Trading found last year that vulnerable homeowners were at risk from unscrupulous sale and rent back operators. It’s not right that people can be pushed out of their homes through dodgy deals.”
Notes for Editors

1. The sale and rent back (also known as sale and lease back) market offers homeowners the option of selling their properties at discounted rates in exchange for tenancy arrangements. Sale and rent back agreements effectively combine two transactions – firstly, individual homeowners sell their property at a discount, and secondly they are offered an agreement to remain in the home as a tenant.
2. At Budget 2008, the Government asked the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) to investigate the sale and rent back market, focusing on consumers’ experience of these arrangements, and consider options where appropriate to strengthen consumer protections. On 14 May the OFT announced that it would conduct a formal market study, working to an expedited timetable in light of stakeholder concerns.
3. The OFT published its report on the sale and rent back market study on 15 October 2008.
4. The Government published its reponse to the OFT market study on 22 October 2008.
5. The Government published its consultation on regulating the sale and rent back market on 6 February 2009.
6. The FSA published its consultation on the details of an interim regulatory regime for the sale and rent back market on 6 February 2009.
7. The Government’s consulation closed on 1 May. The Government published its response to this consultation on 1 June 2009.

• Regulating the sale and rent back market: a consultation

8. The Government is taking action to support homeowners in difficulty:

• Statutory regulation of mortgages and credit provides homeowners with important protections and appropriate means of redress. In 2004 the Government extended the scope of FSA regulation to cover first charge residential mortgages. The FSA’s regime requires that lenders only move to repossession as a last resort. Regulation of other credit business is covered by consumer credit legislation, administered by the Office of Fair Trading (OFT).
• The Government launched Homeowners Mortgage Support on 21 April. This new scheme, together with changes announced at Budget 2009 to Support for Mortgage Interest (SMI) and the Government’s Mortgage Rescue Scheme, will help homeowners who experience a temporary income shock, lose employment, or are otherwise vulnerable, to remain in their homes. The Government has also taken action to help ensure that every household struggling with debts has access to free and impartial debt advice.

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Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.



source Regulating the sale and rent back market - HM Treasury

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Re: Government to regulate sale and rent back market

FSA to protect sale and rent back customers




FSA/PN/071/2009
03 June 2009
The Financial Services Authority (FSA) has today published the details of the regime that it aims to introduce on 1 July to tackle immediate problems for customers in the sale and rent back (SRB) market.
This follows HM Treasury’s announcement yesterday that it is extending the scope of FSA regulation to include SRB, as it considers this to be the most appropriate way of ensuring consumer protection in this market.
This supports the recommendation made last year by the Office of Fair Trading (OFT), following a market study which found that sale and rent back deals had the potential to cause serious harm to homeowners who are often already in a vulnerable position.
A recent FSA survey of 2,006 adults aged 18 and over interviewed across Great Britain found that:

• only 42% of those surveyed knew that SRB is currently unregulated (meaning that people who currently take part in these schemes do not benefit from the protection afforded by the Financial Ombudsman Service if needed);
• the majority thought they would be entitled to stay in their home for more than five years (whereas the typical contract is six to 12 months); and
• the majority (58%) surveyed thought SRB should be regulated.

The FSA is taking a two stage approach to regulating the SRB market. An interim regime will be brought in as soon as any statutory changes come into force (expected on 1 July) in order to address the most immediate problems for consumers, followed by a more comprehensive regime which will start on 30 June 2010.
Ed Harley, FSA head of mortgage policy, said:
"We know that some consumers enter into sale and rent back arrangements without understanding the costs and risks involved. This can be a source of real distress for people in already difficult circumstances. Firms entering our regime will need to run their business in a way that means customers are treated fairly. This includes making clear to customers important details, such as the length of time they can stay in the property, before they enter into the arrangement."
Under the interim regime firms will need to meet FSA threshold conditions including the requirement to have adequate resources and to be run by fit and proper people. Firms will also have to comply with the Principles for Businesses and meet a number of systems and controls and conduct of business rules.
Firms that are currently unauthorised and that intend to carry on any of the new SRB regulated activities after the commencement of the interim regime will need to apply for interim permission. Similarly, firms that are currently authorised for other activities will need to apply for interim variation of permission. Firms are encouraged to start preparing now for authorisation and to apply as soon as the interim regime starts.
Notes for editors

1. The policy statement ‘Regulating sale and rent back: an interim regime’ is available on the FSA website.
2. SRB schemes involve individuals selling their home, usually at a discount, and obtaining an agreement to remain in the property for a set period - typically through an assured shorthold tenancy of six to 12 months.
3. On 2 June HM Treasury published a response to its consultation document, ‘Regulating the sale and rent back market: a consultation’ (published in February). This can be found on its website Home - HM Treasury
   
4. The consumer research quoted was conducted by TNS with a representative sample of 2,006 adults aged 18+ interviewed across Great Britain between 1 and 5 April 2009.
5. The FSA has published some information on its website to help firms prepare for interim authorisation and shall shortly publish sample application forms on its website to give firms additional help. The key dates for the regulation of sale and rent back are as follows:
   1. 1 July 2009: interim regulation expected to begin and firms can start to submit applications for interim permission or interim variation of permission;
   2. 1 August 2009: the closing date for interim permission applications;
   3. September 2009: expected publication of Consultation Paper on full regime for sale and rent back; and
   4. 30 June 2010: SRB regulation under the full regime will begin.
   
   
6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
7. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

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Re: Government to regulate sale and rent back market

more information - http://www.fsa.gov.uk/pubs/other/srb_form_notes.pdf

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Re: Government to regulate sale and rent back market

01/02 – The FSA published new rules and guidance which put in place a strong framework of consumer protection for vulnerable consumers in the sale and rent back (SRB) market. The FSA adopted a two-stage approach to regulating the sale and rent back market. To tackle the most immediate sale and rent back issues for consumers as quickly as possible, it implemented an interim regime from 1 July 2009. The publication contains details of the full regime, which will provide consumers with greater protection from 30 June 2010. The document can be read FSA introduces further protections for sale and rent back customers