Treasury and FSA have both published papers on how they plan to bring the sale and rent back property markets within financial services regulation. OFT recommended in October 2008 that FSA should regulate the sector in respect of transparency, advice and reducing consumer risk. Treasury is now consulting on changes to the Regulated Activities Order and other secondary legislation to achieve this. Treasury plans to define a "sale and rent back agreement" in similar terms to the current definition of "home reversion plan". The only difference between the two definitions will be that home reversion plans are subject to specific "qualifying termination events". So, a plan that involves a person buying property from another person, and then allowing that person to occupy at least 40 per cent as a dwelling, will involve a "sale and rent back agreement" unless it is a "regulated home reversion plan". Treasury plans to extend the RAO to include as regulated activities:
- entering into a sale and rent back agreement;
- arranging a sale and rent back agreement;
- advising on a sale and rent back agreement; and
- administering a sale and rent back agreement.
It plans to apply the same exclusions to these activities as it applies to mortgage and home reversion plan activities. The consultation attaches draft changes to the RAO as well as to the FSMA Orders on appointed representatives and the business test. Treasury wants comments by 1 May.