The FSA has announced that they want to cap rent increases in sell and rent back schemes to 15% per annum, which sounds quite a lot in my opinion. But they will not be regulating this guideline themselves and will be relying on operators within the industry to conduct affordability test. Instead they will leave it up to the Financial Ombudsman to resolve complaints made by tenants.
My problem with this new guideline is the fact that it is only a guideline, which makes it very difficult for the ombudsman to ascertain what is actually unfair. Although, if strict fixed rent increases were brought in this could strangle the industry. However, I think they should perhaps reduce the per annum rental increase from 15% to a lower level or make in line with local rental increases, so they are roughly the same as local properties.
Back in July of 2009 all operators within the sell and rent back industry had to apply for authorisation from the FSA. The FSA predicted that over 1,000 companies would apply, but in actual fact only 80 took the plunge. What does this say; well it says the industry has managed to get rid of a lot of cowboys, but also it is not as big or robust as they thought, which suggests any new regulations must be considered carefully.
Also the new regulation imposed advertising constraints, which prevents sell and rent back companies from using exploitative language and high pressure sales tactics. These include terms life “fast sale” and “mortgage rescue”. Other sell and rent back regulations include a 14 day cooling off period allowing the homeowner to take time to make a carefully considered decision.
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