Sale and rent back schemes
If you're struggling to pay your mortgage, one option you might be thinking about is a sale and rent back scheme run by a private firm. These schemes can also be called buy back or sale and lease back schemes.
A sale and rent back scheme run by a private firm allows you to sell your home to that firm and then rent it back from them as a tenant. You would normally sell your home to the firm at a reduced price. A private firm can mean a company, a broker or a private individual.
These schemes are different from mortgage rescue and homelessness prevention type schemes which some social housing landlords may offer.
You need to be especially careful about signing up to a sale and rent back scheme run by a private firm because they can be risky. You need to understand exactly what you're signing up to and how this might affect your housing and financial situation in the long-term.
It's best to only think about one of these schemes as a last resort.
If you’re really struggling to pay your mortgage, get help from an experienced debt adviser straight away. You can get debt advice from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.
On this page, you can find more information about the risks of signing up to a private sale and rent back scheme and what protection is available.
For more information about other options you might have for sorting out your mortgage problems, see Further help.
There are strict rules that sale and rent back firms have to follow. These are designed to give you better protection and mean that firms:
- aren't allowed to drop promotional leaflets through your letter box
- must check you can afford to enter into an agreement with them and how that might affect your entitlement to benefits
- must give you a fixed term tenancy of at least five years
- will arrange for an independent valuation of your home if you haven’t already got one
- must give you a cooling-off period of 14 days to give you more time to decide what to do.
Sale and rent back schemes are regulated by the government financial watchdog, the Financial Conduct Authority (FCA). This means that the FCA checks whether firms stick to all the rules and makes sure that they meet certain standards. It also means that there is a complaints procedure you can go through if things go wrong.
If you are thinking about signing a sale and rent back agreement with a particular firm, you should check that the firm is listed on the Financial Services Register. You can check the register on the FCA’s website at: www.fca.org.uk.
As private sale and rent back schemes can be risky, you should only think about signing up to one if you have no other options.
To find out about your other options if you're struggling to pay your mortgage, see Further help.
If you are thinking about signing up to a private sale and rent back scheme, you need to check the terms and conditions of the scheme very carefully. Here are some things to look out for:
Check the price you're being offered
Sale and rent back firms usually buy homes below the market rate so you could end up losing money. You might be better off selling your home on the open market and finding somewhere else to rent. This would mean you could make more out of the sale and could use this to pay off any other debts you might owe.
You should also be aware that if the price you're being offered to sell your property is less than what you owe on your mortgage, your mortgage lender can refuse to let you sell it at that price.
For more information about selling your home, see Selling a home.
For more information about selling your property to clear mortgage debts, see Selling your property to clear mortgage debts.
You could still get evicted
Signing up to a private sale and rent back scheme doesn't always stop you from having to leave your home in the long-term. You might still get evicted if:
- you go against any of the terms of your tenancy agreement such as falling behind with the rent payments
- your new landlord gets into financial difficulties and your home is repossessed by someone they owe money to.
For more information about what can happen when your landlord's home is repossessed, see Repossession by your landlord's mortgage lender.
When you sign up to a private sale and rent back scheme, it's likely that your home will be rented back to you on the basis of a fixed term tenancy. When the fixed term tenancy comes to an end, it is usually very easy for your landlord to evict you, even if you've done nothing wrong.
Your entitlement to benefits may be affected
If you sell your home but continue to live there and pay rent, you may not be entitled to Housing Benefit.
Your entitlement to other means-tested benefits, such as income-based Jobseeker's Allowance and income–related Employment and Support Allowance, may also be affected.
For more information about other types of means-tested benefits, see our Benefits section.
For more information about Housing Benefit, see Help with your rent – Housing Benefit
If you are thinking about signing up to a sale and rent back scheme with a private firm, you should get advice from an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
You should also think about getting independent financial advice. This will help to make sure you've thought carefully about how signing up to a sale and rent back scheme will affect your financial and housing situation in the longer term.
- How to sort out your mortgage problems
- What happens if your mortgage lender takes you to court
- Eviction for mortgage arrears
- Selling your property to clear mortgage debts
- Repossession by your landlord's mortgage lender
- Getting financial advice
On the Financial Conduct Authority (FCA) website
The FCA's website has a register of private sale and rent back firms which are monitored by them. Go to www.fca.org.uk.
The Money Advice Service
The Money Advice Service is a free, independent service. Their website has useful information about sale and rent back schemes. Go to www.moneyadviceservice.org.uk.
If you're thinking about signing up to a sale and rent back scheme, you should get independent financial advice. The following organisations can help you find an independent financial adviser:
Independent Financial Promotions (IFAP)
Institute of Financial Planning (IFP)
Personal Finance Society (PFS)