Interesting on this one.
Firstly I agree with Mike's advice that historically an IP would have good to cause to suggest a sale at undervalue and even in extreme cases a misrepresented credit bargain.
Secondly for every "reputable" scheme operator (and I say this bearing in mind they are not regulated) I see 2/3 new ones a month of varying sizes. I act for a number of Lenders in repossessions and we get approached on a weekly basis by such companies asking for our data- and this is no new exercise. I remember being told by one in-house lawyer at a lender that she was asked a similar question about 5 years ago, and refused.
My view is that these schemes will benefit from self regulation immediately in a similar fashion to the equity release SHIP schemes which some of you will be aware of. They also went through a bad patch about 5-8 years ago but decided to set certain minimum advice standards. These standards impose very strict guidelines about who provides the advice and more importantly who should RECEIVE the advice.
Whatever happens to this market I should say that there is tremendous profit being made and this shouldnt be forgotten- none of these guys are doing this for charity. Not only do I suspect that 100% isnt quite 100% but I wonder if the 30% they retain will be based on current market value or value at the 10 year expiry? On top of this most BTL investors have to put up with low rental yields and length rent voids at the moment and these companies have a ready-made tenancy which I assume they also charge at a full rent notwithstanding the rental market is deflated.
And finally (sorry to ramble with no thread!) I wonder what their agreements look like? The SHIP agreements used to have onerous clauses on upkeep; revaluation; inspection and termination.......
Julian Sampson
Solicitor
Wright & Wright LLP
www.wrightandwright.com
See my article in Clean Slate magazine
