Sale & rent back is no answer to a mortgage, says Daniel Gatty
Owner occupiers unable to afford their mortgages have sometimes entered into sale and rent back arrangements (SRBs). Under a SRB, the house is sold, often at a discount, but the vendor remains in occupation under a lease granted by the purchaser. According to a 2008 OFT study, even though SRBs were a relatively new phenomenon, there had been about 50,000 of them. At that time the SRB market was unregulated. The FSA began to regulate it in 2009. According to a recent FSA press release, “the entire SRB market is temporarily shut”. Nevertheless, it is apparent that many tens of thousands of SRBs must have taken place by now.
It appears that in some, perhaps many, SRB transactions, the vendors have been given the impression that they will be able to remain in their homes indefinitely but are only granted short-term assured shorthold tenancies (AST). Often, where the SRB purchase is mortgage-funded, the bank is not told that the vendor is to remain
