Greetings!
Manuals, procedures, disclosure documents, plans, financials……. isn’t regulation fun? I hope that, by now, many of you are well on the way to having a proposition to submit next month and are preparing to move SARB into a new era.
I thought I would give out one last helpful push and review my key 10 points from the near-final rules published three weeks ago now (feels like an eternity doesn’t it!?). You might also like to review some little tips to show how we can bring a few additional benefits to you if you work with us for conveyancing or compliance.
Near Final Rules: areas to consider
1. DISCLOSURES: it may, now, seem patently obvious but your pre-sales disclosures must reveal key details on the tenancy to be granted and an assessment/ explanation of the implicit risks. A disclosure template can be found here but you will see below that we can help with this.
2. VALUATION DISCLOSURE: perhaps an extension of the above but you must specifically advise the consumer that the valuer is not representing them. There is no requirement to provide an independent valuation but the terms of your valuation (such as the market value and a warning on the purpose/retainer basis of the valuation) must be included.
3. THE TENANCY: the FSA have repeated that they do not intend to regulate on the tenancy terms- this is covered appropriately in law but the tenancy terms are indirectly reviewable WHERE they are an explicit term of the SARB Agreement (as they would be). In other words, if you offer a 6 month AST then your tenancy must be a 6 month AST.
4. THE ADVICE CIRCLE: this is a common theme for us but you should be providing appropriate and technically proficient debt and benefits advice. You should also be recommending and ensuring that the Sellers receive independent professional advice on the transaction.
5. WHEN IS A SARB NOT A SARB: the answer to this is all in your Disclosure- if you promise a 5 year tenancy then that is the length of the SARB even though you may only be able to attain that 5 year term by 6 month AST’s.
6. WARNINGS FOR AGENTS & LENDERS: Some of you will have read my articles in the trade press (RICS Business, Estates Gazette, The Negotiator etc) and they may be the best place to leave this. Suffice to say regulation will catch those on the perimeter of the transaction too and regulation MAY be retrospective if a tenancy is substantively varied (say, by adjusting the term) after 1 July.
7. PROTECTING THE TENANT: this concept is a little more nebulous but we interpret this in one of three ways- either the SARB Provider must have assigment arrangements with another company if they fall; the industry comes up with the lifeboat scheme originally suggested in the early Code of Conduct days OR we have created our Tenant Title Policy which will financially compensate the dislocated tenant if their tenancy is prejudiced by the SARB Provider’s title to the property becoming compromised.
8. BY WAY OF BUSINESS and the ARMCHAIR INVESTOR: this area has caused some confusion, largely I feel by some wishful thinkers but the FSA (as at today’s date!) appear to accept that an investor who buys ONE PROPERTY AND ONE ONLY need not be regulated. I personally find this argument tenuous but it is in black and white here.
9. PRIOR EXPERIENCE: over the last 48 hours the FSA have managed to make contradictory statements to us on this point but the current thinking is that an applicant CANNOT benefit from the experience of its officers and MUST have a SARB Agreement under its belt. Subject to Treasury approval we may have found a 24 hour route to fast tracking this for an entire portfolio with only paperwork being pushed- watch this space!
10. INTRODUCING BUSINESS: there is a fine line to be walked here but it is possible to introduce business in SARB without being authorised. In doing so the introducer must be very careful about process and restrict themselves to data capture and assignment to an authorised business. It is always best to talk to the authorised Provider to establish their preferred route.
Source: Wright & Wright Solicitors
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