Sell and Rent Back: What is it?
The sell and rent back scheme was first tried in 1991
at the height of the recession.
It began as an idea to help homeowners, who were in financial difficulty,
to avoid repossession and also to be an investment opportunity for
a group of people who were interested in investing in property.
The concept was too new back then and it was not very
well received. Only a small number of people took advantage of this
new idea rather than lose everything. Some of these people are still
renting their properties, some have bought them back without any regrets,
and some who were unable to get back on their feet financially have
moved to council accommodation, again without regret because they
would otherwise have been repossessed and would have lost everything
without the opportunity to sort themselves out.
The concept is very simple and means that the homeowner
sells his/her house and rents it back immediately from the new owner
without having to move. There is no disruption in the family routine
and no-one needs to know about the change of circumstances from homeowner
to tenant.
The first benefit of this is that repossession is
avoided together with all the stress and grief that this entails.
It also avoids the necessity of moving house and having a black mark
placed against your credit rating.
The second benefit for those who decide to opt for
the sell and rent back scheme is that it also aims to settle all other
outstanding debts of the homeowner and to help sort out the finances
of the debtor, where this is possible, without the need for the debtor
to move from his/her house. Of course the amount of money the homeowner
will have at the end of the transaction to pay his/her debts will
depend upon how much equity is in the property.
The third benefit of the sell and rent back scheme
is that the rent agreed is usually substantially less than the monthly
mortgage repayments. Depending upon which option the homeowner chooses
it is sometimes possible to be rent free for the first year. Some
families find this option to be very attractive because it gives them
some time to get their finances back under control. Again, this will
depend upon the amount of equity held in the property.
The fourth benefit is that in the sell and rent back
scheme the new owner is responsible for the maintenance of the property.
So all the costs of plumbers, electricians, builders, insurance etc
are the responsibility of the new owner. This is a major benefit because
the whole reason for entering into this scheme is to keep your home
and at the same time sort out your finances.
The fifth benefit is that all of the legal
processes of sell and rent back will be taken care of by reputable
and experienced solicitors.
The sixth benefit is that sell and rent back offers
stability. The new owner is looking for a property investment and
wants responsible and long term tenants. It is not in his best interests
to have a frequent change of tenants because that entails additional
expense. Similarly the tenant is usually looking for assurance that
he/she can continue to live indefinitely in their own home. That is
why this scheme is so attractive to both the investor and the tenant.
Although the main reason for entering into a sell
and rent back scheme is the same for all homeowners - purely financial
- different circumstances mean that each deal, and the options available,
has to be tailored to suit the individual needs.
