Assetz® News - OFT probes property investment scheme

OFT probes property investment scheme

25th October 2005 |

The Office of Fair Trading (OFT) has launched an investigation into two property investment agencies accused by customers of dishonestly charging thousands of pounds on deals that failed to live up to sales promises.

Sister companies Instant Access Properties and Track Seminars, both based in Kingston, Surrey, attracted customers through national press and local radio seminars, offering free seminars promising bargain buy to let opportunities and discounts on off-plan properties.

At the end of the free seminar, people were then invited back to a £2,500 seminar, where they would be given an opportunity to invest in buy to let property recommended by Instant Access.

Janet Lay and her brother William Poole told the Observer that they have lost more than £30,000 on an Instant Access recommended property investment. After attending the second seminar they joined an investment club for a fee of £5,000 each, plus a monthly £119 property access fee.

They were shown an off plan development in Basingstoke and put down a £1,000 holding deposit plus a finder's fee of over £6,000 for two one-bedroom apartments. From the Instant Access asking price of £220,000 they were then promised a discount down to £193,000.

Problems began after they had paid the first half of their ten per cent deposit when Mrs Lay "became concerned when the investment broker who was meant to be advising us kept changing his mind about the real value of the property". Worse was to come when lenders valued the properties as being worth £178,000 - £40,000 less than the original price.

Local estate agents subsequently refused to take on the properties as the prices were too low to sell in the current market. The couple are currently seeking legal advice. Instant Access said that the development had been valued by a Royal Institution of Chartered Surveyors recommended agent.

Other instances of questionable practice cited by the OFT include Simon Bruce, who was pressured to put down a cash sum on an off plan flat during a seminar. But when he drove to Gainsborough, Lincolnshire to see the site he was told that planning permission for the development had been refused.

Instant Access said that decision was eventually overturned on appeal. After suing the company for return of his club membership fee, Mr Bruce was returned part of his money in an out of court settlement.

Assetz managing director Stewart Law has called for "sensible regulation of property investment" and safeguards such as risk warnings on documentation, proper valuations and standardised accountancy for inducements such as potential returns.

"Consumers need protecting from rogue property investment organisations that charge exorbitant fees and offer vast but imaginary rewards for minimal initial investment," he said.

"However if over-regulation were applied it may limit the ability of property investment organisations to explain the maths behind investments with gearing, the secret to long term success, which would greatly hamper the investment industry and may not benefit the consumer."