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Can anyone provide a difinitve answer as to whether it is possible to complete a sale and rent back deal without FSA regulation.

I have read the FSA manual for what it's worth, and feel more confused now than before. Having sourced a number of SARB deals before regulation (ethically, I still have the same tenants on the same low rents)  I do get the odd phone call from old advertising, and people that we couldnt help at the time.

Now if I look at the exemptions permitted by the FSA PERG manual below, I feel I would be justifiably un-regulated. Is this correct?

"Exemption will invariably depend on that person's individual circumstances. A number of factors need to be taken into account in determining whether the test is met. These include:-

 

I would be very grateful if someone could shed some light on this as to date I have pointed my enquiries onwards rather than doing anything with them.

As much as I disagree with the SRB regulation I actually think the FSA are pretty clear on this point. It's clear they recognised that there may be a circumstance where a SRB may need to be effected and it's simply not practical to comply with regulation. An example might be Mr Smith, a doctor, who has never had an investment property in his life, is approached by his sister who has got into financial difficulties. He suggests that as he has the money to do so he buys her property and she rents it back from him at enough to cover the mortgage on it. This is quite clearly a one off non commercial SRB. It would be non sensical not to allow a family member or friend to assist in such circumstances and to me this is exactly why the FSA sensibly put in this flexibility. But to then use this to suggest the regulations allow you to do one per year is complete madness. There are people promoting these type of deals who should know better and laughably class themselves as ethical! The regulation may be a hammer used to crack a walnut but the fact is it's here and doing these deals not only puts investors at risk it also puts at risk the very people it was meant to protect; the seller/tenant. There's plenty of ways to do deals don't put your entire business and personal future at risk with one of these deals. Kind regards, Lisa

Hi Lisa,

It's for those very reasons we dropped the SARB stategy at regulation, and have not pursued any of the belated enquiries since. The calls we have taken have been simply moved on. But I have noticed more recently the topic of un-regulated SARB transactions seems to be cropping up on a regular basis.

It's the answer I pretty much expected, but I think there are a lot of people are under the illusion that this is the get out clause. I wonder how soon it will be before an example is publically made.

Interestingly the point you made regarding selling your property to a family member raises a different set of FSA issues, as I dont think it's possible to get a FSA regulated mortgage under those conditions. 

 

 

I agree wholeheartedly with Lisa and certainly our current compliance advice is along these lines. The early confusion was generated by vague comments during the application process to some applicants by the perimeter guidance team but the issue has been clarified with CP09/22. It clearly adjusts the focus away from proportionality and towards commercial gain which I think must be right. On the basis that no investor is likely to be entirely philanthropic I am afraid that the individual unregulated investor model is a bankrupt one.