What is The Sale and Rent Back Scheme??

The sale and rent back scheme is a financial arrangement where homeowners sell their property to a company or investor and then rent it back from them as tenants. 

The scheme is often targeted at homeowners who are facing financial difficulties, such as mortgage arrears, debt problems, or impending repossession. These homeowners may be struggling to meet their mortgage payments or facing other financial pressures, so they decide to contact companies or investors that specialise in sale and rent back arrangements. 

The company will typically arrange for a valuation of the property and based on this valuation and the homeowner’s circumstances, the company will make an offer to purchase the property. If accepted, the homeowner then sells their property to the company. The sale is usually completed quickly, providing the homeowner with a lump sum of cash from the proceeds of the sale.

Once the sale is completed, the homeowner becomes a tenant in the property and enters into a rental agreement with the company. The terms of this agreement, including rent amount, duration, and any other conditions, are typically negotiated between the homeowner and the company.

Although they have sold their property, the homeowner is able to remain in the same home as a tenant, providing continuity and stability for themselves and their family and the lump sum received from the sale of the property can provide immediate financial relief to the homeowner, giving them stability and allowing them to address pressing financial issues. 

However, the homeowner now becomes responsible for paying rent to the company, which may be higher than their previous mortgage payments. While the sale and rent back scheme can offer a lifeline to homeowners facing financial difficulties, there are potential risks and drawbacks to consider which may include lower sale prices, higher long-term costs, limited security of tenure, and the lack of regulation in the industry.

The rent back scheme can be a viable option for homeowners in certain circumstances, but it’s important for individuals to carefully consider the pros and cons and seek professional advice before entering into such arrangements.

There is a Financial Conduct Authority handbook that can be found on this link.