The National Landlords Association (NLA), the leading representative body for private-residential landlords, has developed guiding principles for its forthcoming Code of Practice for landlords involved in the sale and rent back market.
In the current economic climate, more and more people will be facing financial difficulty including keeping up their mortgage repayments. Although sale and rent back will not stop repossessions, ethical sale and rent back could be a way for homeowners to remain in their properties but become tenants.
The guiding principles launched today are a central part of the Code of Practice expected to be published later this month. At its heart is the protection of vulnerable consumers.
Guiding principles for the NLA code of practice
* Standardised key facts document provided by member landlords allowing homeowners to compare the deals on offer. The document will include the level of discount being offered, all fees payable by the vendor, the actual market value of the property, clear evidence that the vendor has been made aware their beneficial interest in the property will cease upon sale and a statement of understanding certifying that all terms of the sale have been explained to the vendor. Member landlords will also have to provide a written tenancy agreement for the tenant.
* Every tenant and member landlord will have access to independent dispute resolution service for cases where there is a dispute.
* If a member landlord breaks the terms of the Code of Practice, there could be significant financial penalties.
* Unless the tenant breaks the terms of the tenancy agreement, the member landlord commits not to seek possession of the property using Section 21. In other words, it would be difficult to sell the property expressly to realise a capital gain at the expense of the tenant.
* The development of a ‘landlord lifeboat’ scheme, whereby, member landlords who then themselves experience financial problems would notify the NLA and seek another NLA member landlord to purchase their properties without disruption to the tenant.
* The member landlord would be required to support their own valuation with local evidence corroborating the actual market value.
* The vendor must have access to independent legal advice confirming they are fully aware of the implications of the transaction and subsequent tenancy.
Ethical sale and rent back is an option for some consumers. It provides flexible tenure and the ability to remain in their property for those who can no longer afford the costs of home ownership. Although still a relatively new market, there has been a significant amount of negative media coverage about the small minority of rogue operators who target vulnerable consumers and offer unfair deals.
The Office of Fair Trading has now launched a market study into sale and rent back which is due to complete its work in September. One of the possible outcomes following the OFT market study could be to encourage the development of a consumer code of practice.
David Salusbury, Chairman, NLA, commenting on the growing sale and rent back market, said:
“By the end of this month we expect to be in a position to publish a NLA Code of Practice for sale and rent back. The guiding principles we are releasing now give a strong indication of the NLA’s determination to offer robust levels of protection to distressed homeowners and their families.
“Sale and rent back, by its very nature, deals with individuals who are in stressful situations making them more vulnerable to rogue operators. It is of critical importance that landlords who are involved in sale and rent back approach these homeowners with the utmost professional integrity and sensitivity. People’s homes are not like other products and services and we must act now to ensure these vulnerable consumers are protected from rogue operators.”