Legal action by the Department for Productivity, Energy and Industry shut rip-off firms who fleeced hundreds of gullible investors out of an estimated £4million.
The fear now - as endless TV programmes tell of "easy and quick" money to be had from Buy-To-Let and property development - is that thousands more investors are still at risk of falling victim to other con-men offering instant property profits. The property industry is calling on the Government and the Financial Services Authority to toughen up rogue operators.
Neil Lewis, Chief Executive of PropertySecrets.net warns that the legal action must be just the start of tougher policing in the property sector. "Instant profits in property are a myth," says Lewis. "Property success and wealth comes when investors take a 10 year view on their investments. Anyone looking for a same day fix to their money woes might as well visit the casino! The Buy-To-Let industry, for the most part, is professionally run, but there are still unscrupulous operators out there.
"We believe it is absolutely vital that the Government requires property sourcing companies to fully disclose ALL fees and commissions earned so that investors can see the true cost of what they are buying. For more than five years now we have been warning of the unscrupulous methods and schemes used to take money from would be Buy-To-Let investors. Those tricksters are still out there despite this recent excellent legal ruling.
"The worst practices involve taking large upfront payments often running to many thousands of pounds from unsuspecting people on a 'promise' of building a large portfolio through future purchases of as-yet unseen properties. Currently, many property sourcing companies are suspected of earning on both sides, by charging large seminar or membership fees or a finding fee, and also taking a commission from the property developer.
"The Government and the Financial Services Authority must require companies to provide full disclosure on their source of fees and commissions, just as they have done with mortgage brokers."
So how should investors avoid being ripped off? PropertySecrets.net offer this check list:
- Check that you are not asked to hand over a property deposit to the sourcing company and that the property or approved plans actually exist. NEVER hand over money upfront to an agent that promises to "look for opportunities".
- Check, before handing over a finder’s fee for "your" property that there is a written reservation agreement between the developer and the investor.
-Is the middle-man buying the development at one price and selling it on to you at a higher price?
- Is the agent, as well as asking fees from you, also taking fees or commissions from the property developer, finance brokers and other property service providers?
- Make sure you know from the outset exactly what charges and fees you will be liable for and what you can expect for those fees.
