Short answer – Sale and Rent back is a criminal offence without a special government licence – the remedy is that the seller can rescind the contract (return the money) at any point after completion and take the house back from the landlord / buyer. Great news for the seller if the house has gone up in value. Less so for the landlord. The landlord may also be prosecuted, fined, and face a potential custodial penalty if it’s done without licence from the government. The practise was clamped down on in 2010 after the GFC.
Sale and Rent Back – Heads the landlord wins tails the tenant looses… Here’s why it’s prohibited
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Table of Contents
What Is Sale and Rent Back?
Sale and rent back (also called sale and leaseback) lets a homeowner sell their property and rent it back from the buyer. While it sounds simple, these deals are heavily regulated in the UK.
FSMA 2000 and Regulated Sale and Rent Back Agreements
Under the Financial Services and Markets Act 2000 (FSMA) and the Regulated Activities Order 2001 (Article 63J), most residential sale and rent back arrangements are regulated activities.
If the seller (or a related person) stays in the home and occupies at least 40% of the property as their dwelling, the buyer is entering a regulated sale and rent back agreement. This includes entering into, arranging, administering, or advising on the deal.
Why Most Sale and Rent Back Deals Are Illegal Without Authorisation
Section 19 of FSMA contains the general prohibition. Carrying out these regulated activities without FCA authorisation is a criminal offence. Penalties can include fines and up to two years in prison.
Unauthorised agreements may also be unenforceable, leaving buyers exposed to serious legal and financial risks.
Does It Apply to Commercial Property?
No. The FSMA sale and rent back rules apply only to residential properties where the seller occupies the home. Pure commercial property transactions fall outside this regime.
Risks for Buyers and Sellers
- Sellers risk losing their home if rent rises or terms change.
- Buyers without FCA authorisation risk prosecution and unenforceable contracts.
- Many “we buy any house” rent-back offers operate illegally.
Key Takeaways for Property Investors
Always check FCA authorisation before entering any residential sale and rent back. Most firms cannot legally offer these deals due to strict rules introduced to protect consumers.
Need expert guidance on property transactions?
Contact the conveyancing specialists at Conveyancing Limited for clear, compliant advice on complex deals.
Useful links
Selling a House Without an EPC: Is It Money Laundering or Proceeds of Crime Under POCA?
Buying a Converted Property: Mortgage Risks, PCCs and Essential Legal Checks
Commonhold Conversion in 2026: Voluntary or Compulsory?
Relevant sections of the Financial Services and Markets Act 2000:
- Section 19 (The general prohibition)
- Section 22 (Regulated activities)
- Section 23 (Contravention of the general prohibition)
- Section 26 (Agreements made by unauthorised persons)
- Section 28 (Agreements made unenforceable by section 26 or 27)
What is generally NOT caught by the regulated sale and rent back regime:
- Ordinary short-term leasebacks (e.g. seller staying for a few weeks or months while moving house) – typically such arrangements are by licence rather then lease – see Street v Mountford for the difference, which is not always clear however.
- Pure commercial properties.
- Sales where the seller is a company or limited liability partnership.
- Standard buy-to-let purchases without the seller remaining in occupation as their home.
- Situations where the seller moves out completely.
The key trigger is the ongoing residential occupation by the individual seller after the sale. If that element is not present, the strict FSMA regulated sale and rent back rules usually do not apply.