SRB landlords and companies have one month to submit an application to the Financial Services Authority for permission to continue their business activities as full regulation kicks in.
Under the new rules, SRB operators will have to demonstrate they meet minimum standards and are fit and proper persons. The regime will require that businesses treat customers fairly, making clear important details, such as the length of time they can stay in the property, before they make their final decision on whether to sell.
The main part of the interim regime is the requirement on applicants to provide a sustainable business plan which shows funding streams and evidence that the funding will continue. More specifically, the FSA will be looking to see that applicants have access to funds in order to complete purchases.
One of the major criticisms of SRB has been the lack of transparency. Therefore, under the new rules, SRB operators will have to guarantee access to an independent valuation. In addition, the consumer must be fully aware of the level of discount being offered and that they understand their beneficial interest in the property will cease upon sale.
'The clock is now ticking if companies or individuals want to continue with sale and rent back transactions. Ethical sale and rent back must be 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,' said John Socha, Vice Chairman of the National Landlords Association.
'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. Only when sale and rent back operators are within a more regulated environment can we be confident that consumers will be treated fairly,' he added.
Although the interim regime began on the 1st of July 2009, the start date of the full regulatory regime is the 30th June 2010.
