Sale and rent back
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Sale and rent back is a form of property transaction involving the expeditious sale of an owner occupier's residence to a landlord or property company and renting it back from the new owner.
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[edit] Sale and rent back in the UK
In the UK, the residence is sold and rented back to the previous owner usually, but not always, on an Assured Shorthold Tenancy. The purchase price is generally below market value.
[edit] Advantages of this arrangement
The value of ones property can be released in a shorter time scale than that needed for a residential sale (no chain etc.). In addition, the rent back option negates the need to move house.
[edit] Disadvantages of this arrangement
The downsides are that the rent back tenancy is that in some circumstances the tenant is only provided with a limited tenure tenancy, in some cases for as little as 6 to 12 months after which the landlord may seek possession of the property with only two months notice. In addition subsequent refinancing can see a new owner taking control, which adds to the uncertainty of tenure. In recent years, the market for this option has swelled but the openness or longevity of the companies operating in it can be questionable. In addition to short tenancy, the future of rent charged can be unknown. Such companies advertise in the same media as sub-prime lenders, supplementing this with door to door leaflet drops.
This method is NOW regulated by the UK FSA. Interim Regulation was introduced on the 1st July 2009. Full Regulation will be introduced on 1 July 2010.
