Sale and rent back
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Sale and rent back or Sell and rent back is a form of Equity release involving the expeditious sale of ones residence to a property company and renting it back from the new owner.
Sale and rent back in the UK
In the UK, the residence is sold and rented back to the previous owner usually on an Assured Shorthold Tenancy. This would be between 50 and 75% of the properties market value.
Advantages of this arrangement
The value of ones property can be released in a shorter time scale than that needed for a residential sale (no chain etc). In addition, the rent back option negates the need to move house.
Disadvantages of this arrangement
The downsides are that the rent back tenancy is only guaranteed for 6 to 12 months with a month or so notice. Subsequent refinancing can see a new owner taking control, which adds to the uncertainty of tenure. In recent years, the market for this equity release option has swelled but the openness or longevity of the companies operating in it are questionable. In addition to short tenancy, the future of rent charged is unknown. Such companies advertise in the same media as sub-prime lenders, supplementing this with door to door leaflet drops.
This method is not regulated in the by the UK FSA however a voluntary regulation scheme now exists operated by the National Association of Ethical Property Investors, who require their members to offer an insurance-backed guarantee regarding the longevity of the tenancy.