Obs: Inquiry into property investment scheme

Inquiry into property investment scheme

Some investors claim to have lost thousands through two 'discount club'
firms, reports Christopher Browne

Sunday October 23, 2005
The Observer

The Office of Fair Trading is investigating two Surrey property
investment companies following complaints by consumers who claim to
have lost thousands of pounds in deals that promise more than they
deliver.
An OFT spokesman said: 'We are collecting evidence and carrying out an
ongoing investigation into Instant Access Properties and its associate
company Inside Track Seminars. We will report back when we have
finished looking into the companies.'

The companies, with offices in Kingston, Surrey, advertise in the
national press and on local radio, offering free local seminars,
enticing people with information about bargain buy-to-lets and
discounts on off-plan properties. They then invite homeowners to a
second two-day seminar costing =A32,500.

Janet Lay and her brother, William Poole, believe that they are more
than =A330,000 out of pocket after buying properties recommended by
Instant Access Properties. After attending one of the company's weekend
seminars, they joined an investment club for =A35,000 each, plus a
=A3119-a-month property access fee.

The siblings were shown drawings of an off-plan development in
Basingstoke, Hampshire, and decided to put down a =A31,000 holding
deposit plus a finder's fee of just over =A36,000 for two one-bedroom
apartments. Instant Access Properties then discounted the =A3220,000
asking prices for the units to a far more attractive =A3193,000.

However, soon after paying the first half of their 10 per cent deposit,
Lay says she and her brother 'became concerned when the investment
broker who was meant to be advising us kept changing his mind about the
real value of the property'.

Even this did not prepare Janet and William for the shock when their
lenders valued the apartments at =A3178,000 - =A342,000 less than the
original figure quoted by Instant Access. Although Janet appreciates
that the housing market might have declined, she believes this is only
partly responsible for her losses.

Janet asked local estate agents to sell the partly built apartments:
'They refused to take them on as they said their values were too low
for them to sell on the current market. I don't know how Instant Access
arrived at the discount figure they gave us. Because of this and all
the money we paid them, we are both more than =A330,000 out of pocket,'
she says. The couple are seeking legal advice.

Tony McKay, chief operating officer of Instant Access Properties, says:
'As soon as one of our schemes is released, we get a valuation carried
out by a chartered surveyor recommended by the Royal Institution of
Chartered Surveyors and base our discount on that figure. Both Janet
Lay and William Poole have bought other properties through us, in the
US and Spain, which have been making money for them. We have held
meetings with them and managed to obtain a mortgage for Ms Lay at full
loan-to-value.'

Sales consultant Simon Bunce was nearly talked into buying a
non-existent apartment by Instant Access. 'During the seminar in
Birmingham they tried to sell me an off-plan flat in Gainsborough,
Lincoln shire, even giving me a valuation and trying to get me to part
with a large sum of cash. But when I drove there to check it out I
discovered the planning department had turned down an application to
build on the site.'

When Bunce demanded repayment of the =A39,000 he had paid for a seminar
and club membership, the company refused. As he had paid his seminar
fee by credit card, he explained what had happened to his credit card
company and it agreed to reimburse his fee. He then sued Instant Access
for the =A36,395 he had paid to join its club and won an out-of-court
settlement for part of his money. 'I know a number of other people who
have suffered the same fate I have,' says Bunce.

He has reported his experiences to Surrey trading standards, and the
Office of Fair Trading.

Instant Access says: 'Planning permission to build 13 riverside units
at Gainsborough in Lincolnshire wasn't granted at first but was later
given the go-ahead by the local planning authority. When the property
was offered to Instant Access it was at the pre-planning stage. As it
happens building permission was later granted, although if it hadn't
been approved the people who had put down deposits on units would have
got their money back.'

The OFT recently launched a national awareness campaign, highlighting
property investment schemes in which 'would-be investors attend a free
presentation and are persuaded to hand over thousands of pounds to sign
up to a course promising to teach them how to make money dealing in
property. Schemes may involve the opportunity to buy properties which
have yet to be built, at a discount.'

Investors should be aware of the risks of such investments, and get
independent valuations of the properties before committing money.

In May, Inside Track called on the Financial Services Authority to
regulate property investment schemes, saying regulation would be in its
own best interests as well as that of consumers. McKay said: 'We are
very concerned about the poor quality of service being offered by many
companies in this sector.'

The firm also said that these were isolated cases and that it was
unaware of any OFT investigation. The investigation is believed to be
in its early stages and there have been no findings yet against the
companies.

=B7 Cash would like to hear from any readers who have lost money through
property investment clubs or companies. Please email