What is Sale and Rent Back?
This is where a company buys your house and then rents it back to you. However there can be serious problems...
If you are thinking of a Sale and Rent Back, where you sell the house but get to stay there by renting it back, there are some serious issues to consider:
- You may be offered only a fraction of the house's value.
- The tenancy that you are given can mean you only have the right to stay in the house for 6 months.
- There is no protection against the company that you sold the house to if they increase the rent to a far higher amount after a short period of time.
- If you are on benefits or intend to apply for benefits you might have problems if have savings from the sale.
- If you are planning on claiming Housing Benefit, your claim will only be successful if selling your home was unavoidable (for example if your lender had started posession proceedings against you) - seek advice.
So what questions should you ask if you are thinking of going for a Sale and Rent Back?
- How much will they give you compared to the value of your house? Could you get a better deal elsewhere or by selling it yourself?
- If you are in receipt of benefits how will it affect them?
It may be that a Sale and Rent back agreement could be your only option in which case here are the questions that you should be asking the Sale and Rent Back companies:
- How much of the market price will they give you for your house? If it is lower than 70% you can probably get a better deal elsewhere or selling it yourself.
- What kind of tenancy are they giving you? It will most likely be an assured shorthold tenancy, which gives you very little security.
- How long does the initial agreement last? Some SARB companies will give you a minimum 2 year tenancy agreement.
- What guarantees are there that they won't increase the rent or that it will be capped at a certain rate?
- Will I have to pay any fees?
Once you have asked these question you need to then think about how good a deal you are getting and how secure are your rights to stay in the house once you are renting it. Remember if you are going to go for a Sale and Rent Back agreement shop around as some companies are better than others.
What are your other options?
Debt advice
You may be able to reschedule your debts to free up more money to pay your mortgage.
Agreement with all your creditors
This is similar to debt advice but the creditors are bound by an agreement, called an Individual Voluntary Arrangement or IVA. Some debts could be written off.
Equity Release
Some people will qualify for equity release which will give you a lump sum for a percentage of your home.
Mortgage
Your current mortgage company may be willing to negotiate repayments or you may get a better mortgage deal elsewhere.
For further advice or if you have any questions please contact Manchester Advice on 0161 219 2728 or email sarbadvice@manchester.gov.uk
All advice is free and confidential for Manchester residents.
Need more help? Live in Manchester? Send us an email
FeedbackDid you find this page useful? Yes or No