MIS-SOLD INVESTMENTS

Investing into property is not uncommon. Property investments can be lucrative and can provide both rental income and capital growth. However, over the last decade or so there have been a series of failed property schemes operated from within the UK and abroad. These are often aimed at luring inexperienced investors from the UK and abroad with promises of excellent return on your investment, but which have resulted in investors losing millions.

These sorts of investments are often marketed as alternative investments in things such as office units, hotel rooms, student accommodation or storage units. Investors are promised excellent returns on their investment with guaranteed returns; rental guarantees or buy back arrangements.

Investors are normally persuaded to pay for the investment using either money in a pension or cash savings. The investor will then acquire an interest in a development property or acquire a loan note which is to be redeemed in the future. The investors’ money is then pooled with other investors funds to pay the promised returns for an initial period but in most cases the property scheme then fails or is never completed leaving investors out of pocket.

At Birch Law we have experience of dealing with both UK and foreign investors in claims against either their financial advisor or, if they have transferred their pension into a SIPP (Self Invested Personal Pension), their SIPP operator as well. We look to recover the client’s initial investment plus interest. If they have transferred out of a Defined Benefit pension scheme as well, we will also seek damages to compensate the client for their loss of ‘notional transfer value’, i.e. what they would have made had they kept their pension where it was.

If you have used a solicitor in connection with the purchase of the property, then you may be able to bring a claim against the solicitor as well. The Solicitors Regulation Authority has released several warnings to solicitors over the years warning them against getting involved in property scams and pointing out the red flags of such schemes. Where a solicitor has failed to warn you about the risk of investing into such property schemes then you may be able to bring a claim against them for professional negligence.

If you have suffered financial loss in a property investment you may be entitled to compensation. We are already working on cases relating to several property investment schemes such as German Property Group; Dolphin Trust and Magna Wealth.

A collective investment scheme is:

• Any arrangement relating to property (including money).
• The purpose or effect of the arrangement is to allow investors to receive sums paid out of the profits or income arising from the acquisition, holding, management and/or disposal of the property.
• The investors do not have day to day management or control over the property; and
• The investors contributions were pooled and so is the profits or income out of which they were to be paid.

Establishing or operating a collective investment scheme is a regulated activity requiring authorisation from the Financial Conduct Authority (FCA). Subject to certain exemptions a collective investment scheme cannot be promoted to the public unless it is authorised or recognised under the Financial Services Markets Act.

UCIS are certainly high-risk investments and should only be recommended to those investors with experience of these sorts of investments. They are not subject to the same regulation and/or restrictions under the FCA rules and by their very nature are extremely speculative.

At Birch Law we have experience of dealing with investments into hotel rooms and suites; apartments; desk spaces in office buildings; storage units; plantations; and property schemes (in the UK and abroad).

Store First. Store first was promoted as a safe and secure investment with excellent returns. The proposal was that investors would acquire individual units within a storage facility and these units would then be rented out to the general public. Investors were promised guaranteed returns and the option to sell the units back if they were not happy with them. Unfortunately, neither the guaranteed returns nor the option to sell the units back ever materialized resulting in investors losing millions and millions of pounds.

Dolphin Capital or German Property Group was promoted as an excellent investment. That it was safe and secure with healthy returns on investment. It was often because of these sorts of statements that thousands of investors invested millions of pounds into Dolphin. The investment opportunity was that Dolphin would raise finance to purchase and develop specified properties by issuing fixed rate, secured Loan Notes to investors. Each property had a different series of Loan Notes with the Loan Notes being purportedly secured by a first legal charge over a corresponding property. From as early as 2015 investors were approached by financial advisors and were advised that they should invest into Dolphin. Fast forward 5 years and Dolphin has failed, and thousands of investors are now out of pocket. Dolphin should never have been recommended to investors as it was high risk and unsuitable for all but them.