I've been investigating two related companies involved in the buy-to-let property investment club business - Inside Track and Instant Access. The banner above is taken from the Instant Access website and will elicit a hollow laugh from the many investors who've lost hundreds of thousands of pounds in their dealings with these companies.
Investors would go along to property investment seminars, receive the hard sell brainwashing treatment, then sign up to invest in off-plan properties in the US, Spain and the UK - supposedly at significant discounts - the promise of instant riches ringing in their ears.
Needless to say rental incomes and property values failed to match up to the hyperbolic claims made at the seminars. But were these claims deliberately and knowingly misleading? Was there an intent to defraud? To what extent are the investors to blame for being credulous and greedy? These are the questions that will need to be answered as and when disgruntled investors bring their cases to court, as several are intending to.
Inside Track has gone into administration owing nearly £10 million. And guess who the biggest creditor is? Instant Access, to the tune of more than £8 million. HM Customs and Excise is particularly keen to know what has happened to the money, as are the administrators and creditors.
The wider issue is that property investment clubs like these are not regulated by the Financial Services Authority - a glaring omission decried by the excellent Vince Cable MP, amongst others. This is what he told me:
"I think these property investment clubs have dangerously contributed to the bubble in the UK housing market and elsewhere. They are thoroughly unhealthy and the seminars are appalling. These companies should be acting ethically and they are not.
"I have in the past sought action from the Financial Services Authority (FSA) to regulate these property investment clubs and provide a framework of consumer protection. But the FSA largely misunderstood how dangerous these clubs are and decided not to do anything. I think it's time we approached the FSA again."
It is indeed.
Read my stories about Inside Track and Instant Access on the Interactive Investor website.
Comments