There is no doubt that banks and other lenders are making it more difficult to borrow money to finance a mortgage. Thousands of consumers across the country are starting to realise that loan companies, banks, credit card companies and mortgage lenders are slowly choking the supply of available cash.

First-time buyers are finding it more difficult to save a reasonable sized deposit, and even when they do it can sometimes be a strain to get a reasonable mortgage offer. In addition, many first-time buyers, who took out their mortgage two or three years ago, find it difficult to place a remortgage.

This all this began, last year over in America, with the so-called sub-prime mortgage crisis. This crisis rippled around the world, as many of the companies who were putting money into this risky market, were based all on other continents including Europe and the UK.

Because so many mortgage lenders lost so much money in the crisis they either don’t have the money to lend or are nervous about current lending conditions. All is not lost there are still lenders out there who can assist with mortgages and remortgages it is often just a matter of finding a competent broker.

One aspect of this crisis is that many people are turning to different measures, including the much talked about sell-and-buy-or-rent-back deals. Research has shown that where there is an affordability gap these types of deals that particularly popular, especially with younger mortgage holders.

This is a relatively new idea; even a few years ago no one sold their home, to a company then rented it back. These days its a huge business with a sizeable share of the mortgage finance market.

These schemes can be a good solution for many people having problems but the sell and rent back system but there is no doubt that this controversial way of holding on to your home is not for everybody.

There are many reasons why people turn to this system, usually when they are in a large amount of debt. They may take this option, rather than being repossessed or perhaps they’re getting divorced, and can not afford the mortgage on their own.

If done through a reputable company the schemes can prove useful, although there are some less savoury operators in this market.

Last month, the dramatic change of heart by lenders, who pulled back from the under 125% mortgage market. Many companies that this within the space of just a few days with implication that they’ll feel that this is now a difficult market.

This way of holding on to your house may be of benefit to many people. What is essential to find a respected company to deal with this extremely important transaction.

It should also be pointed out that there are other options such as debt consolidation mortgages and general second mortgages that can be of great assistance to many people who are having difficulties.

Sell and rent back should possibly not be the first choice for most people. Having payment difficulties or debt problems, a second mortgage may be slightly difficult to obtain, but they are available from reputable brokers.

The Advertising Standards Authority decided Land & Property Bank.com Ltd’s advert placed in local press was ‘likely to mislead by omission’.

It received complaints saying statements such as ‘the simplest way to avoid repossession is to sell your home’ and ‘you can remain in your house for as long as you require’ would give the wrong impression, and ignored that there were other ways for people to avoid repossession and tenancies being offered were on a short-term basis.

Homeowners were told in the advert: ‘Local company offers homeowners fast solution’ and invited to: ‘Cash in on your house without moving’.

The ASA decided these claims and others, such as ‘equity can be raised quickly through fast property sale’ and ‘one telephone call to Land and Property Bank.Com Ltd was all it needed to solve the problem’ did not make it clear terms and conditions were attached to any agreement.

‘We considered that the advert, therefore, could exaggerate the desirability of that option over and above other options, such as negotiating with a current mortgage provider, selling on the open market or (for older homeowners) using a regulated equity release product, depending on circumstances,’ the ASA ruled.

‘We noted we had not seen evidence to show that tenants could always remain in their home for as long as they wanted to.’

It also agreed the advert was not clearly marked as an advertisement as it appeared in the form of an article with the heading ‘Cash Crisis?’ followed by a by-line ‘exclusive by John Rea’. Although, ‘advertisement’ was at the top of the page printed in small letters it was ‘considered this was not sufficiently prominent to avoid giving the impression that the advert was a piece of journalism rather than a marketing communication’.

Land & Property Bank.Com Ltd told the ASA it agreed there were other options for people and this was clearly explained to potential clients when an inspection and consultation on the property was carried out.

The organisation also said it had a number of options available for those who entered an agreement with them, from a one-month licence to life tenancy. It believed the advert was easily identifiable as a marketing tool because of the word advertisement at the top of the page.

The OFT asked the firms to substantiate claims made in their adverts or change them.

The resulting action by the OFT has now led to three companies no longer offering the service, six have removed their websites, and a further three have made amendments to their website. Two more have been reported to the FSA.

A key point of contention were claims that residents were able to live in properties for life after they have sold them under SARB, else benefit from low rent, or buy back their homes at any point.

The Sell And Rent Back market has been flooded with opportunists over the past year, resulting in threats to consumer interests and the potential to be exploited by unscrupulous businessmen.

This is especially as they seek to build up property investment portfolios during the downturn, by trying to tap into the market in Below Market Value (BMV) properties.

The result has been a situation open to abuse, with lack of controls to protect consumer interests.

The FSA has already announced that the market will become regulated from next July, a move broadly welcome by established SARB companies who already have a long-standing presence in Britain.

Accordingly to Jason Shaw at MPG Investments, “The industry in general has suffered a reputation problem, after opportunists began moving away from the buy-to-let market. Unfortunately, this meant that a number of individuals and small companies sought to exploit debt in a way that should never have been considered acceptable.”

“That’s why we’re happy that the FSA has finally stepped in, to ensure that all companies in the sale and rent back market are forced to operate at the same level of professionalism that MPG has insisted on for over five years.”

by Brian Turner

1. Revamp the entrance

First impressions count, particularly if you’re about to put your house on the market.

By painting the front door in a strong colour, such as red or blue, updating doorway furniture and the entrance mat, you’re sending a message that your home is up-to-date and well maintained before anyone even crosses the threshold.

2. Refresh with paint

Painting the interior can lift the mood of your house and it’s inexpensive if you’re willing to do the work.

If your budget allows, tackle walls yourself and get professionals in to do the ceilings, as these can be hard going on the neck.

If you’re taking the DIY approach, tackle one room at a time. Choose a warm, dry day to start, move all of your furniture into the middle of the room and do the first coat in the morning. As most paint needs only a few hours between coats, you can do the second later in the day and have the room finished by the evening.

Bigger rooms will take more time of course, but the one-room-at-a-time method limits disruption.

3. Update flooring

Getting carpets cleaned can make a huge amount of difference to the look (and smell) of a home, so calling in the professionals is well worth considering.

However, no amount of cleaning is going to lift a floor covering beyond its use-by date, so it may be time to replace what you’ve got.

If floorboards are showing a little too much wear and tear, have them re-sanded, washed, stained, painted or simply resealed. If you decide to rip up old carpet and find old dirty floorboards underneath, mix up a solution of boiled linseed oil, turpentine and white vinegar in equal parts and test a patch with a lint-free cloth to clean and feed the timber.

If the wood looks good, you may have unearthed a gem.

4. Quick kitchen fixes

New cupboard doors and handles update a kitchen in a budget-friendly way. “For a pre-made cupboard door off the shelf, the cheapest option is a laminated door for around $15,” says Amanda Falconer, author of The Renovator‘s Survival Guide.

“The typical cupboard door is about 600 by 720 millimetres and you should be able to get a two pacpolyurethane finish for around $50 a door.”

If you can get away with just painting the doors, Amanda likes the product ESP (Easy Surface Prep), by Flood Company Australia, over which she says “you can paint on almost anything”.

Another option is to replace the benchtop, but consider what will work with your floor, says Judy Dymond, a colour consultant for The Laminex Group.

“As your floor is probably the largest area of singular finish, ensure you take the colour and pattern into consideration.”

If you can stretch to changing cabinetry doors and benchtop, “think about combining timber looks for lower and upper storage with a solid colour that complements and links into your benchtop selection,” says Judy.

“You can create impact with contrasting lower and upper cabinetry with your benchtop acting as the link.”

5. Replace splashback

Sometimes making one major change in the kitchen is enough to lift the whole room, so if you don’t want to mess with the cabinetry, cast an objective eye over the splashback as it’s a way to inject some personality into the room without going over the top.

Glass splashbacks are still popular but, at about half the price, acrylic is a cheaper alternative.

There’s a great colour range on the market as well as clear options so you can personalise your selection with wallpaper, for instance. The only limitation is that acrylics can’t be used directly behind stoves.

6. Change the light switches

Often, it’s the details that count and standard white light switches tend to look yellow over time.

Getting an electrician to replace them isn’t a costly exercise and you can often pick up everything you need at a big hardware store, so the major cost will be labour. Many brands make coloured or metal switch plates, but consider the fact switches tend to be utilitarian items that don’t need to be made a feature of.

7. Rethink window treatments

Sometimes, you don’t realise how grubby a window is until it’s obvious. In the meantime, the dirt is building up and affecting the quality of light.

Get the glass sparkling, check latches are working correctly and contact a glazier if any panes are cracked or need replacing.

“Putting up a new blind or curtain can be a great start to adding or changing the style of a room,” says Shaynna Blaze, interior designer on The Lifestyle Channel’s Selling Houses Australia.

“For a sleek look, use roller (also known as Holland) or Roman blinds made from simple fabrics and colours. To add extra warmth and style, use shutters or timber venetians, and then there are curtains to add luxury. Window treatments aren’t something we change often in the lifetime of the house, so make sure you wait and save for the best quality you can afford.”

8. Makeover the bathroom

“You can get a quick lift by replacing the toilet, sink and tapware,” says Amanda Falconer.

“A new toilet gives the impression of cleanliness and a new sink and taps can also help turn an ordinary or tired bathroom into something more modern. There are sinks of almost any shape and colour available, but more organic shapes are the current trend.”

If you want to go purely down the DIY route, think about painting the existing tiles. White Knight makes high-gloss tile paint as well as a nifty little Grout Pen, for painting over discoloured grout.

9. Fit new taps

If the bathroom and kitchen are basically in good shape but just in need of a little updating, look at the taps.

By fitting new, good-looking, matching taps, or taps that link aesthetically, you’re bringing a sense of cohesion to the house. Good taps also suggest good plumbing.

10. Groom the garden

Winter is the perfect time to pull on the garden gloves and get stuck into the backyard.

After a general tidy up, look at any gaps in planting that need to be dealt with. If you’re putting the house up for sale, gather reasonably established potted plants to fill up these holes as you can take them with you when you go.

Get hold of a high-pressure hose and give paths and paintwork the once-over. Clean the barbecue and give outdoor furniture a scrub and, if needed, an oil, as spring is just around the corner.

By Vera Klein, Notebook

This particular hearing saw a company by the name of Repossession Stopped acquiring the property of a couple in Shrewsbury who had lived there for over 25 years. While the couple in question had behaved impeccably and were on time with their payments, the company which acquired their home had failed to keep up with the mortgage payments and the mortgage provider sought to repossess the property.

Housing charity Shelter took the case to court on behalf of the couple involved and the judge ruled that they could either takeout a mortgage themselves and buy the property or else come to an agreement with the mortgage company to rent the property indefinitely. This is a major ruling for the sector and offers significant protection for those forced to take this controversial route.

From 1 July 2009, SRB landlords and companies will have only one month to submit a complete application for interim permission to continue their SRB business activities. Under the new rules, SRB will become a regulated activity and applicants 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.

John Socha, Vice Chairman, National Landlords Association, speaking about the interim regime, said: “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.

“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.”

Although the interim regime will be begin from 1 July 2009, the start date of the full regulatory regime is 30 June 2010.

While selling and renting back in scotland is a good option for most, it is not free of risk. But, the risks can be minimised just by choosing the right sell and rent back company in scotland. The best company will always try to help rather than taking advantage of your situation. Although it is a fact that they have to get their profit otherwise they would be thrown out of the business but they must never take undue advantage of situation. Also, they will have no problems in letting you use your home in the way you want. What it means is that you will never have to live or feel like a tenant.

Even if you believe that you have found a right company, you must never overlook the importance of checking all legal documents. But, apart from paying attention to the quality of a company to get aforementioned benefits, you must keep your eye on some other benefits. For instance, on some occasions you can qualify for Housing Benefit.

Housing Benefit can help you to deal with your problems in a slightly better way. Basically, you can qualify for it if you think you will not be in a position to afford the rent after selling your entire home. Here, you must keep in mind that several conditions apply to this entire concept. Also, you will have to provide several evidences showing that you are left with no choice but to sell your home. For instance, letters from mortgage lenders, proof of your income and evidence of other specific factors creating an impact on your decision should be given to the council.

The fact of the matter is that if you are interested in getting some money to deal with mortgage payments, it is better to use the option of sell and rent back your property. But, you must understand that there are other benefits that can be obtained in specific situations. You must however try to educate yourself about those situations by consulting with a professional so that you may know if you can qualify for Housing Benefit or not.

Do keep in mind that researching is the only way to learn all details pertaining to benefits associated with selling your properties.

Northumbria Police are probing North East Property Buyers and Newcastle Home Loans after after a referral from the Financial Services Authority.

The Gateshead firms buy homes from people across the region who are struggling to pay their mortgages and allow them to rent them back.

However, the firms have allegedly defaulted on repayments which has led to hundreds of repossession orders.

On Thursday, police made five arrests on suspicion of money laundering and conspiracy to defraud.

It is understood those arrested include Grace and David Purdie, of Darras Hall, Northumberland, each a director of one of the companies.

Grace Purdie’s business partner, Michael Foster, of Houghton-le-Spring, Wearside, is also understood to have been arrested.

The investigation is continuing into the partners of Darlingtonbased David Oliver Estate Agents, including the Purdies’ son, Craig David Purdie.

Mr Purdie is a former appointed representative of Newcastle Home Loans. His business partner, Andrew Oliver Bellwood, was arrested on suspicion of money laundering, in March, after £34,000 was found in his home in Newton Aycliffe, County Durham.

Detective Chief Inspector Jim McAll, of Northumbria Police’s economic crime unit, said: “What is alleged is a very serious and complex fraud. If proven, and if it is on the scale alleged, it will probably be one of the biggest property frauds in the country.

“It is certainly the biggest one we have ever dealt with.”

Det Chief Insp McAll said the inquiry could take years as detectives search through thousands of documents connected with the companies’ mortgage deals.

As officers continue to investigate the criminal allegations, tenants facing repossession must fight to stay in their homes through the County Courts.

Kelly Bushby, housing specialist for Clark Willis Solicitors, in Darlington, said she was dealing with 20 clients in the area, but suspects there could be more.

She is preparing to fight repossessions using an as yet untested legal argument, and plans to instruct a leading barrister.

Mrs Bushby said: “We argue that tenants have an overriding interest and should therefore be allowed to stay in their homes.

Perhaps if they had been given an assured shorthold tenancy things would be different, but, usually, they have been told they could stay for ten years or even life.

“There is also a possibility of a negligence claim against the solicitors who handled the sales which could see the ownership of the property revert to the tenants as if the house was never sold.

“In either event, it will take time and I would advise anyone who thinks they could be affected to get in touch with us.”

Clark Willis has offered to represent clients through the first stages of the proceedings free.

For details, call 01325-745687.

Homeowners who fall victim to rogue sale and rent back companies may be able to claim compensation from 1 July in the first step towards full regulation of the schemes by the Financial Services Authority (FSA).

Full regulation will be introduced on 30 June next year, but it was announced today that the watchdog would introduce interim steps to tackle immediate consumer problems.

From the start of next month, people who lose money or their homes through these controversial schemes will be able to take their cases to the Financial Ombudsman Service if complaints to the companies themselves are not handled in a satisfactory way.

Sale and rent back companies, which usually advertise in the back of tabloid newspapers and online, target struggling homeowners by offering to buy their homes and allowing them to continue living in them as tenants, usually on an assured shorthold tenancy lasting six to 12 months.

Homeowners often stump up the cost of a valuation typically about £500  only to find the price being offered falls far short of the market value.

Up until now the companies have been unregulated and some homeowners who have gone ahead with the deals have found themselves facing eviction because the new owner wants to sell the property on or has failed to keep up with mortgage payments.

Under the interim regime, firms will have to apply for permission from the FSA to continue trading: they must comply with the FSA’s principles for businesses and will be required to have adequate resources and be run by fit and proper people. The watchdog will be able to stop, ban or fine firms that break the rules.

The move follows Office of Fair Trading (OFT) research last year which identified a number of risks to homeowners entering into these arrangements. The OFT made three recommendations to the government including compulsory regulation, increased consumer awareness and improved information about housing benefits.

A recent FSA survey found that only 42% of people questioned knew that sale and rent back is unregulated, although 58% thought that it should be. The majority also thought they would be entitled to stay in their home for more than five years, while the typical contract is six to 12 months.

Ed Harley, the FSA’s head of mortgage policy, said: “We know that some consumers enter into sale and rent back arrangements without understanding the costs and risks involved. This can be a source of real distress for people in already difficult circumstances.

“Firms entering our regime will need to run their business in a way that means customers are treated fairly. This includes making clear to customers important details, such as the length of time they can stay in the property, before they enter into the arrangement.”

Homeowner victims

The Observer has been highlighting the plight of those who have already fallen victim to sale and rent back schemes for several years. Unfortunately, the rule changes will not allow those who have suffered from rogue firms to claim compensation retrospectively.

Jean Turner and her husband sold their Norwich home to a sale and rent back company after falling three months into arrears on their mortgage. Although they only owed ?1,500 they had been taken to court by their lender and faced repossession.

Jean, now aged 53 and on disability benefits, approached the local council for advice and was given the number of a sale and rent back firm called Home Assured. Its representative visited the Turners and agreed to buy their home; the firm paid off the outstanding mortgage and arrears. The Turners then paid £500 a month in rent to stay in their home, the same amount they had been paying for their mortgage, but had no tenancy agreement or rent book.

Jean, who has since split up from her partner, discovered that although she was still paying rent to Home Assured it had subsequently sold her home to another owner. She received a court summons because the new owner failed to keep up with the mortgage payments, and the final straw came when he tried to raise the rent from £500 to £650, saying that all she had to do was ask the council for more money.

Jean refused and instead went to Shelter for help and now lives in local authority housing. “It was a horrible experience,” she said. “It is about time someone did something about these schemes. I wouldn’t want anyone to go through what I have over the past few years.”

The danger of people falling prey to unscrupulous firms should also be reduced by the introduction of the government’s £285m mortgage rescue scheme in January. Although only two households had been officially rescued by the end of April, government officials said more will be helped with 70 cases in the pipeline.

guardian.co.uk © Guardian News and Media 2009

The FSA said it wanted “to offer some protection to vulnerable homeowners as soon as possible” and aimed to introduce an interim regulatory regime on July 1. A more comprehensive system would start in June 2010, it added.

Ed Harley, the FSA’s head of mortgage policy, said: “We know that some consumers enter into [these] sell and rent back arrangements without understanding the costs and risks. This can be a source of real distress for people in difficult circumstances.”

Firms entering the FSA regime would “need to run their business in a way that means customers are treated fairly”, he added. “This includes making clear important details, such as the length of time customers can stay in the property, before they enter into the arrangement.”

Ship, the equity release trade body, welcomed the development, which it said was urgently needed. “Our main concern has been over the lack of information given to customers about the risks,” it said. “This new regulation addresses this issue.”