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British court shuts down dishonest investment clubs

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Six companies in the dock for scams that promised to build members valuable property portfolios at discount prices

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The British government is shutting down unscrupulous property investment clubs that rip off their members for millions of pounds. It has closed four clubs and will wind up two more shortly.

Property investment clubs have flourished in recent years in response to the buy-to-let boom. In return for paying a joining fee and property purchase charges, investors are offered the opportunity to buy residential property at discounted prices which they can then rent out. Property portfolios mostly include new homes.

Clubs usually require investors to put down a large deposit when making a purchase. Most introduce buyers to mortgage lenders and rental property management firms.

Four companies have been wound up by the High Court in London following Department of Trade and Industry investigations: Mansion Investments, Sterling Mansion, CM2 Services and two related firms, Furniture Right and Seal Properties.

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These companies ran similar scams. Several promised investors they could each build up property portfolios worth GBP1million (about $14 million) within a year.

At seminars and sales meetings, clients were told they would be offered new houses or luxury flats at discounts, without the need for deposits. They offered to arrange mortgages for clients themselves, and said rental income from tenants would cover mortgage payments. However, most clients lost their signing-on fees and ended up with no property.

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