Struggling homeowners warned to beware 'rent-back' deals

These businesses buy properties from families struggling to meet mortgage payments then lease them back to save them the heartbreak of moving out.

The firms often take advantage of the seller's desperate financial state by paying well below the home's market value.

In some cases the figure paid may be just a quarter of the property's true worth.

Worse often follows as the company agrees to a reasonable rent for the first six months then imposes huge increases to force the former owner out.

The property firm is then free to sell the home on at a large profit. The former homeowner, in contrast, is left massively out of pocket - and homeless.

There is no law against sale and rent back schemes, which have boomed after five interest rate rises in the past year and a 30 per cent increase in repossessions.

The Citizens Advice Bureau said many firms were making easy cash by targeting vulnerable homeowners.

In one appalling case, an elderly man living on his own in Wolverhampton sold his home under such a deal for £40,000, even though it was valued at £165,000, the charity said.

"Sell and rent back" firms advertise in local newspapers and distribute leaflets door-todoor offering money to pay off debts and promising to save homeowners from repossession.

The Citizens Advice Bureau warns, however, that many who sign up to the schemes immediately regret doing so.

A spokesman said: "The sale could be at a very, very large discount to its market value, often far lower than the price you would get on the open market. They are then left at the mercy of the new owner."

There have also been cases where the landlord who buys the house defaults on the mortgage, meaning the bank takes back the property anyway and the resident is left homeless.

The Citizens Advice Bureau called on the Government to introduce measures to regulate the sell and rent back industry to prevent further scandals.

Debt charities urged debtladen homeowners to talk to their lender before looking at sell to rent schemes.

Francis Walker, of the Consumer Credit Counselling Service, said yesterday: "Nowadays, mortgage companies regard repossession as a last option.

"If you are in dire straits then see if your mortgage lender will wait while you sell your home on the market.

"Sell to rent should be a last resort, if that."