RLA : RPI : Tricks and mortar companies `tip of iceberg`

News from the Residential Property Investor, the bi-monthly magazine for RLA members

other artilces from the July / August 2005 issue

Tricks and mortar companies ‘tip of iceberg’ - July / August 2005

BUY-TO-LET COMPANIES closed down in High Court action by the Department of Trade and Industry could be just the tip of the iceberg.

Sterling Mansion based in Newcastle-under-Lyme and the London-based Mansion Invest-ors were said to have operated scams which parted people from around £800,000.

The companies promised to show investors how to build a portfolio of properties worth £1m in a year, in exchange for fees of up to £33,000.

A third company, CM2 Services in Peterborough, offered the chance to buy ‘portfolios of debt’. Nearly 200 investors handed over £3.3m.

As we went to press, action against two other companies, Portfolios of Distinction and Turningpoint Seminars, had been adjourned to June 15.

Consumer minister Gerry Sutcliffe hailed the liquidations as a major success.

He said: "These companies knew that their clients, who had all invested substantial amounts of money, couldn’t make anything like the returns promised.

"The schemes were completely misleading and set up with the sole aim of parting people from their cash."

The Royal Institution of Chartered Surveyors advised: "When a property investment scheme or training course is offering easy access to vast riches, consumers should immediately look for the catch."

Inside Track, a company which operates in the buy-tolet market holding seminars, and a related company, Instant Access Properties, that acts as a broker for investment purchases, called for the industry to be regulated.

Another company, Assetz, warned investors against overpaying on seminars. Managing director Stuart Law said: "I urge the DTI to crack down on the frightening numbers of cowboy investment companies that are still trading, promising ‘get rich quick’ schemes in return for phenomenal fees. Companies such as these bring the entire sector into disrepute."

He said the High Court cases were just the tip of the iceberg, and claimed that companies still operating were charging people thousands of pounds in seminar costs and membership fees.

The Association of Residential Letting Agents said there was no need for investors to pay for information that was freely available on its website.

Instant Access Properties is in talks with the receivers of the companies closed down by the High Court to buy the assets of the former businesses.

It says it will offer practical support to investors to help them complete on purchases, and offer free seminars.

Andrew Ward, chief executive of the property investment specialists Equity International Group, called for a code of practice to regulate firms in the buy-to-let market.

But he defended the principle of investors being educated before embarking on a course of action with risk attached to it.

"The potential investor must be on their guard at all times. There is nothing wrong with attending a free introductory presentation; in fact Equity Property Portfolios offers this to our prospective clients. But the question at the end of the session must be, ‘Did I learn anything or was it merely a twohour harangue to get me to the next stage?’"

He added: "We need to understand that investment in property is not a bad thing per se.

"On the basis that 20 per cent of the Sunday Times Rich List owe their wealth at least in part to property, there has to be some sense in it. And if it were not seen as a good idea, why would the Government be encouraging investment in residential property by allowing such investments to become part of our SIPPs?"

other artilces from the May / June 2005 issue

RPI news archive

Member Login