The Telegraph quotes Charlotte Hill on sale-and-rent-back schemes

What happens when a solution to pay off mortgage debt is too good to be true? The Telegraph has reported on the experience of homeowners who were caught out by a 'manipulative' non-authorised sale-and-rent-back scheme.

In principle, a sale-and-rent-back scheme can allow homeowners who are struggling to afford their mortgage, to sell their property and continue living there as a tenant while looking to buy a smaller home with the proceeds of the sale. Unfortunately, however, some homeowners under threat of repossession have fallen into the trap of unauthorised sale-and-rent-back schemes.

The Financial Conduct Authority (FCA) has identified 29 victims of Secure Property Consultants, whose director Rajinder Gill was jailed for two-and-a-half years after a hearing at Southwark Crown Court on March 10. From September 2014 to November 2018, Gill ran an unauthorised sale-and-rent-back scheme, targeting vulnerable homeowners in financial difficulty across Britain. In most cases, he offered to provide loans to his victims for the purpose of paying off their immediate arrears. Many were unaware of the high interest and high fees attached to these loans. 

Other victims agreed to sell their properties to associates of Gill, having been promised that they could remain as tenants once the transaction was completed. Around 10 victims were subsequently evicted. Additionally, the scheme deliberately sold homes for far less than they were worth, leaving many victims with significantly less equity from the sale than expected, and various knock-on financial troubles.

Charlotte Hill, Partner in our Financial Services Regulation and Funds team, comments in the piece on warning signs to look out for, in the event that a homeowner is considering a sale-and-rent-back agreement.

As a rule of thumb, if someone is offering a rapid solution to mortgage distress but is asking you to give up ownership of your home, that is something that should always prompt very careful scrutiny.

"One of the biggest warning signs is when a homeowner is encouraged to sell their property at a substantial discount and rely on promises that they will be able to remain in the property indefinitely. Consumers should check whether the provider is authorised by the FCA to carry out sale-and-rent-back activity and should take independent legal advice before agreeing to any arrangement.

Read the full article in The Telegraph here (subscription required).