The Office of Fair Trading (OFT) has called for urgent regulation of the sale and rent-back industry.

The competition watchdog said, in a report published today, that more than 50,000 householders had agreed to sell their home to landlords, often for a sum less than its market value, on the assumption that they will be allowed to remain as tenants.

However, the OFT found evidence that vulnerable tenants often had no protection against being evicted from their homes months after the sale of their property.

Around 1,000 companies are operating in the sector, according to the report.

John Fingleton, chief executive of the OFT, said: “The unfamiliar and highly pressurised situations that these people find themselves in may leave them particularly vulnerable to misleading statements or valuations from sale and rent-back firms looking to make a deal.”

Homes are typically bought by sale and rent-back companies at 15 per cent below market value, according to the National Landlord Association (NLA). However, in some cases desperate homeowners agree to sell for 50 per cent less than the market price.

Experts say there has been a sharp increase in the number of homeowners turning to sale and rent-back schemes in the past year.

The sale and rent-back market has been described as an offshoot of equity release, which allows homeowners to hand over a stake in their home to a lender in exchange for a lump sum or regular income payments. However, while the equity release market is regulated, sale and rent-back firms are not.

Andrea Rozario, of Ship, the equity release trade body, said: “There has been a surge of interest in sale and rent-back schemes in the last 12 months because of the worsening economic climate.

“There is no barrier to firms wishing to enter into this market, so it is inevitable that there is going to be less security for customers and, as the OFT made clear in its report, the customer bears all the risk.”

Citizen’s Advice and Shelter, the homeless charity, had called on the OFT to investigate the sale and rent-back sector. Last year Citizen’s Advice received more than 200 calls from consumers concerned about sale and rent-back agreements.

Peter Tutton, of Citizen’s Advice, said: “We are getting increasing numbers of calls from people worried about making their mortgage repayments so I would urge the Government to act on the OFT's recommendations as quickly as possible.”

The National Landlords Association (NLA) defended firms active in the market.

David Salusbury, chairman of the NLA, said: “We believe the majority of sale and rent-back landlords act with professionalism and integrity. A small number of rogue operators have brought the entire market under close scrutiny.”