Sale and rent back: how it works and the risks

What are the risks?

MoneyHelper lists the main risks.

• Your rent might go up, both during and after the fixed term.
• You might have to leave when the fixed term ends.
• You could be evicted during the fixed term if you break the tenancy terms, for example by falling behind with the rent.
• If the buyer gets into financial difficulty, the property could be repossessed and you might have to leave.
• Because you sell at a discount, you will inevitably get less money than on the open market.
• Selling at a discount might affect your eligibility for bankruptcy or other forms of insolvency.

MoneyHelper also suggests checking whether a scheme would affect your benefits, including Housing Benefit, with your council’s welfare benefits office or Citizens Advice.

How do you check a firm on the FCA register?

Checking takes a few minutes, and it is the single most important step.

1. Use the FCA Firm Checker or the Financial Services Register at register.fca.org.uk. Search by the firm’s name or its firm reference number.
2. Check its permissions. Being authorised for something else is not enough. The FCA says that if a firm is not authorised, or does not have permission for the service you want, you should avoid dealing with it.
3. Watch for clone firms. Fraudsters sometimes copy the details of genuine firms. The FCA advises making sure the contact details you have been given match those shown on the Firm Checker.
4. Understand what you would lose. The FCA explains that if you deal with an unauthorised firm, you will not have access to the Financial Ombudsman Service, and you will not be protected by the Financial Services Compensation Scheme if the firm fails.

MoneyHelper gives the FCA’s consumer helpline as 0800 111 6768, for checking the register or reporting an advert you think is unfair, unclear or misleading.

What are the alternatives?

MoneyHelper suggests looking at every other option first:

• Speak to your mortgage lender. It may agree an arrangement to repay arrears. MoneyHelper notes that lenders have to consider a request to change the way you pay.
• Get free, independent debt advice. Advisers can look at your whole situation and may deal with lenders for you.
• Talk to your other creditors about a repayment plan.
• Check whether you are entitled to benefits or other help.
• Consider selling on the open market and renting somewhere else.

Free help is available from MoneyHelper (moneyhelper.org.uk), Citizens Advice, StepChange and National Debtline. For housing advice, contact Shelter in England, Shelter Cymru in Wales, Shelter Scotland, or Housing Rights in Northern Ireland. Our pages on financial difficulty and facing repossession explain more, and our guide to selling with a mortgage covers arrears and negative equity.

What if a quick sale company suggests you could stay on as a tenant?

Treat it as a warning sign until you have checked. An arrangement where you sell and carry on living in at least 40% of the property as your home is likely to be regulated sale and rent back, whatever it is called. The firm needs FCA authorisation and must follow the rules above. Our guide to spotting rogue quick sale companies covers other red flags.

How is Sell My Property Online different?

We introduce homeowners, with their consent, to vetted cash buyers on our panel, who pay us for each introduction. A sale to a cash buyer is an outright sale: you move out on completion. We do not offer, arrange or recommend sale and rent back, and we cannot advise on whether selling is right for you.

If you are weighing up a sale because of money worries, please speak to a free debt adviser first. If you then want to understand how an outright sale through us would work, see how it works.