The National Landlords Association (NLA), the leading representative body for private-residential landlords, remains committed to further raising standards among landlords operating in the sale and rent back sector.

Responding to the Office of Fair Trading (OFT) Market Study on sale and rent back recommending the need for statutory regulation by the Financial Services Authority (FSA), the NLA is pleased that the OFT has come to a similar conclusion: that something had to be done about sale and rent back.

The OFT’s report says that:
* some consumers enter into sale and rent back transactions when it might not the best option for them
* some sale and rent back firms may mislead customers as to the value of their property or the security they have as tenants. This includes telling people they will be able to stay in their home for years, when in reality the tenancy may only be guaranteed for six to 12 months
* there are examples of firms imposing substantial rent increases or even evicting tenants after a short tenancy period. It is also possible that tenants may lose their homes if the landlord defaults on the mortgage, and
* some consumers may be evicted because they cannot afford the agreed rent, which suggests staying in their property may not have been sustainable in the first place.

As a result, the main recommendation of the OFT report is that there should be statutory regulation of the sale and rent back sector by the Financial Services Authority (FSA). The details of regulation will be up to the FSA to determine but the OFT considers it should include:

* an obligation on sale and rent back firms to be more transparent about the initial valuation and sale price, the terms of the tenancy and the amount of rent to be paid. In particular, firms must offer forms of tenancy that match the assurances they give to customers, and
* a requirement of firms to tell consumers about the free, independent advice available to them before they decide to sell.

The NLA has recently consulted across the sector about a Code of Practice aimed at encouraging transparency and openness for sale and rent back transactions. The OFT study means there is now recognition that ethical sale and rent back has a place within the housing market. The NLA will support any steps to drive out ‘rogue’ operators from the private-rented sector.

David Salusbury, Chairman, NLA, said:

“Although the OFT has moved directly to FSA regulation, it does not affect the NLA commitment to doing what it can to assist cleaning up this market. The NLA will offer its full assistance to the Government and the FSA as they consider the implications of the OFT report.

“As we have said all along, people’s homes are not like other commodities and some of the questionable practices that have come to light through the OFT’s investigations have left some consumers even more vulnerable than before. But it must be remembered this is not the whole picture. We believe the majority of sale and rent back landlords act with professionalism and integrity. A small number of ‘rogue’ operators have now brought the entire market under close scrutiny.

“The NLA called for change and the OFT report is an answer to that call.”