The fact that sale and rent backs are becoming increasingly popular is a sure sign of the times: rising interest rates and a slow down in the economy have left many houseowners exploring the possibility of switching from a mortgage to a rent. It is also one option being explored by many older people who are “asset rich and cash poor” and want to release the money tied up in their home.

But there are always caveats to be carefully considered, and BBC’s Watchdog programme has just highlighted some of the key ones that should always be weighed up in any sale and rent back scheme.

In particular, it is crucial to understand the distinct difference between a regulated Home Reversion and an unregulated sale and rent back: the former offers greater security and peace of mind to the seller because they can remain in their home for life. Firms who are authorised and regulated by the Financial Services Authority (FSA) must offer a secure lifetime lease.

“Unfortunately,” says Michael Holt, Managing Director of one of the industry leaders SYH Charterhouse, “a proliferation of dubious enterprises have rapidly grown in recent months, circumventing the risks that the FSA had sought to contain through the authorisation and regulation of bona fide companies.

“Consumers are being attracted by alarmist advertisements that are not bound to comply with the regulations that are in place for authorised companies, and these ads are playing on people’s emotions and worries.

“Vulnerable people are lured by the promise of big cash incentives with no mention being made of the sacrifices that they will eventually make in terms of security of tenure and controlled rents. Current FSA regulation on all financial promotions for authorised companies is in place to stop just that.”

Essential Checklist

The ten top tips and questions you need to ask when considering any kind of home reversion or sell and rent back scheme

Lease for life

1 Is the Company saying that you can have a lease for life?
2 If yes, ask them if they are authorised and regulated by the Financial Services Authority (FSA). Companies offering a lease for life must be authorised by the FSA. Ask them for their FSA registration number, then check online at the website linked below or call the FSA’s consumer helpline on 0845 606 1234.

Rent

3 Does your rent stay the same?
4 If your rent is able to increase, how do you know what it will be?
5 Will you be able to afford it for as long as you plan to stay?
6 Are the provisions in the agreement reasonable if you are late paying the rent?

Ownership

7 Do you know who your landlord will be?
8 Check that your landlord is a genuine and credible company

Eviction

9 After you have signed the agreement, is the landlord able to terminate your tenancy if he chooses?

Repairs

10 Do you know who is responsible for maintaining the building?

Relevant links
FSA

This article appears courtesy of www.maturetimes.co.uk and is the copyright of Mature Times Publishing Limited.