MCOB 4.11 Sale and rent back: advising and selling standards

1. (1) 1

   A regulated sale and rent back firm, must make the following disclosures to a customer; both orally and in writing; during the initial contact2:

   2
   1. (a)

      the service the firm is offering the customer, making it clear whether the firm will be acting as a SRB agreement provider, a SRB adviser or a SRB arranger and the particular regulated sale and rent back activities for which the firm has a Part 4A permission;

   2. (b)

      if the firm is acting as an intermediary, whether it deals with a single or a range of SRB agreement providers and whether or not those providers are authorised under the Act; and

   3. (c)

      how much the firm will receive in connection with the transaction, whether by way of fees, commissions, charges, retentions or otherwise and whether any such sum will be payable out of the sale proceeds of the property, paid directly by the customer or provider or otherwise and whether or not any of these will be payable if the customer decides not to enter into a regulated sale and rent back agreement.

2. (2)

   If the precise fees, commissions, charges, retentions or other sums in (1)(c) are not known in advance, the firm should estimate the amount likely to apply in respect of the transaction.

1. (1)

   As soon as the customer expresses an interest in becoming a SRB agreement seller, a regulated sale and rent back firm must provide him with the Money Advice Service consumer factsheet on sale and rent back in a durable medium which may be accessed through http://www.moneyadviceservice.org.uk.

2. (2)

   The firm on providing the Money Advice Service consumer factsheet in (1) to the customer must give him an oral explanation of it, so as to ensure that the customer fully understands its contents.

A regulated sale and rent back firm must not permit a potential SRB agreement seller to become contractually committed to enter into a regulated sale and rent back agreement unless it has reasonable grounds to be satisfied that a firm with permission to advise on regulated sale and rent back agreements has advised the particular customer to enter into it.2

2A firm must take reasonable steps to ensure that it does not advise a particular customer to enter into a regulated sale and rent back agreement unless the regulated sale and rent back agreement is suitable for that customer.

2For the purposes of MCOB 4.11.3A R:

1. (1)

   a regulated sale and rent back agreement will not be suitable unless, having regard to the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware, the firm concludes on reasonable grounds that:

   1. (a)

      the customer can afford the payments he will be liable to make under it; and

   2. (b)

      the proposed regulated sale and rent back agreement is appropriate to the needs and circumstances of the customer;

2. (2)

   a firm must base its determination of whether a customer can afford the payments he will be liable to make under a regulated sale and rent back agreement, and whether it is appropriate to his needs and circumstances, on the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware;

3. (3)

   no advice must be given to a customer to enter into a regulated sale and rent back agreement if there is no regulated sale and rent back agreement which is suitable from within the product range offered by the firm.

2In assessing whether the regulated sale and rent back agreement is appropriate to the needs and circumstances of the customer for the purposes of MCOB 4.11.3CR (1)(b), as a minimum requirement a firm must consider the following list of factors:

1. (1)

   whether it is appropriate for the customer to sell his property for a price less than its value (as determined by the valuation which is required by MCOB 6.9.2 R, including where applicable a valuation obtained by the SRB agreement seller as described in MCOB 6.9.2R (4)) (where this is proposed under the regulated sale and rent back agreement);

2. (2)

   whether it is appropriate for the customer because he is in financial difficulty;

3. (3)

   whether all other options have been explored and eliminated, including the customer speaking to his home finance provider and other creditors, getting debt advice, releasing the equity by other means and checking whether he is eligible for government or local authority help;

4. (4)

   whether it would be more appropriate for the customer to sell his home on the open market;

5. (5)

   whether the benefits to the customer in entering into the proposed regulated sale and rent back agreement outweigh any adverse effects it may have for him, including on his entitlement to means-tested benefits and housing benefits;

6. (6)

   the feasibility of the customer raising funds by alternative methods other than by a sale of his property; and

7. (7)

   if the customer is not under threat of repossession, why it is appropriate for the customer to take out a regulated sale and rent back agreement rather than to use an alternative method of finance.

1. (1)

   A firm must make and retain a record of the customer information that has been provided to it, including that relating to:

   1. (a)

      the customer's income, expenditure and other resources that it has obtained from him for the purpose of assessing affordability, together with the stress testing of the rental payments;

   2. (b)

      the customer's needs, objectives and individual circumstances that it has obtained from him for the purpose of assessing appropriateness; and

   3. (c)

      the customer's entitlement to means-tested benefits and housing benefits, including any evidence provided by the customer, that it has obtained from him for the affordability and appropriateness assessment;

   and which explains why the firm concluded that the regulated sale and rent back agreement was suitable for the customer and why it advised him to enter into it.2.

   2
2. (2)

   The record in (1) must be retained for a minimum of five years from the date on which the assessment of suitability2 was made, or one year after the end of the fixed term of the tenancy agreement under the regulated sale and rent back agreement, if later.

   2

A firm need not comply with the requirements imposed on a regulated sale and rent back firm in this section to the extent that it is satisfied on reasonable grounds that another firm, with the appropriate permission to do so,2 has already done so.