Selling and Buying Back Property
Sale and Lease Back Update
SALE AND LEASE BACK SCHEMES
If you are having difficulty paying your mortgage, one solution you may be considering to allow you to stay in your home is a sale and lease back option. Under this sort of scheme you sell your property to a company which then rents it back to you for an agreed monthly or weekly rent.
Whilst this may seem as though it is the answer to your difficulties, such schemes can be fraught with problems and it is vital you take independent legal advice before you sign up to such a scheme however desperate you may feel.
The companies who offer these sorts of schemes are usually private profit making companies, and at the moment, they are not regulated by the Financial Services Authority, although the Office of Fair Trading has asked the regulation should be put in place to give consumers better protection.
Problems encountered with this type of scheme are: -
They are misinformed about the value of their property and sell for a lot less than the present value
If the purchasing company is funding the purchase by a mortgage, and most do, in the event of the company not making mortgage payments, the former home owner may be evicted by the company's lender
Most "lease backs" are no more than six months tenancy agreements and at the end of the tenancy agreement the former owner faces eviction or a substantial increase in the rental payable
Whilst promises may be made that the former owner can buy the property back, in practice it may be difficult for the former owner to do so.
If you are considering one of these schemes, make sure that you have explored all of the options with your current lender and before committing yourself.
If in doubt contact one of the solicitors in our Property Department on 020 8 686 5000.