There has been much concern about sale and rent back schemes. Typically, the owner will sell the property, usually at a discount, and then be allowed to remain in the property as a T. While the scheme does release equity (so the owner can repay debts) it does mean that the owner will be losing security of accommodation, and merely acquiring the uncertain security of tenure of a T (typically, as an assured T).

Needless to say, the recession has led to an increase in the number of such deals, with concerns being expressed that vulnerable debtors are being taken advantage of. Several cases have gone to court, with the courts generally being keen to do what they can to side-step the legal documentation. For instance, in a recent case it was held that failure to include all of the terms in the written agreement meant that there was a collateral contract that was not in writing (which meant the whole transaction failed for want of writing under s2 Law of Property (Miscellaneous Provisions) Act 1989). While that was only a county court decision, it is illustrative of the approach being taken by many judges. Even more interesting, however, was the obiter suggestion by the judge that part of the pay-back provisions might have been unenforceable under the Unfair Terms in Consumer Contracts Regs 1999. As is well known, an ‘unfair’ term is one that has not been significantly negotiated (ie it is largely a standard term), and which, contrary to the requirements of good faith, causes a significant imbalance in the party’s rights. The 1999 Regs include various terms that might be an indicator of being ‘unfair’ and this includes anything ‘requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation’. In the judge’s view, the pay-back clause was potentially in breach.

We repeat that this is merely the obiter comment of a county court judge. But, it may be an argument worth pursuing. See Scrowther v Watermill [2009] EW Misc 6 (EWCC) (access free at www.practicalconveyancing.co.uk).