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Financial companies are putting ever greater pressure on the elderly to cash in the equity on their homes - either in return for a leaseback of the property or a place in residential care. Barbara Panvel checks out the fine print.

Buyers and sellers beware!

A retirement village offered every facility to buyers, including an on-site care home so that people who could no longer look after themselves could remain in that community.

The care home has now been closed, to the dismay of residents. Promises made verbally and in advertising literature were broken and there was no reference to these in the contracts – so there seems to be little chance of redress.

In that part of the country, however, the planning authorities are careful: Stroud District Council says that "When we gave permission, we were keen to protect the care home and we therefore added conditions emphasising its status . . .The owners cannot change its use without applying to us for planning consent."

Buyers and also those attracted by sell to rent back schemes should be careful that every detail of the agreement is recorded.

At a time when personal debts are high and 20% more homes were repossessed in 2007 than in 2006, the fairly new sell and rent back schemes sound such a good option.

Those who can no longer make their monthly mortgage repayments can sell their house but continue living there as tenants, their children can stay at the same school and they would still have the same social contacts. The deals are conducted quickly and quietly, with no need to tell neighbours or family.

However finance websites warn that the ‘realistic cash offer’ often turns out to be less than the market value, typically 70% to 80%. In addition to this loss, these services are unregulated and a previous owner could be given notice at the end of a six or 12-month assured shorthold tenancy.

Perhaps responding to these concerns, one TV sell to rent back advertisement now offers 100% market value and a ten-year guaranteed tenancy.

To guard against distress and financial loss, it is vitally important to make sure that every detail of an agreement has been set down clearly in the contract – whether buying or selling!

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