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Watchdogs warn about suspected property scammers
19 February 2015
Consumer watchdogs are raising awareness about suspected property investment scams.
City regulator the Financial Conduct Authority (FCA) is alerting property investors to stay away from the Ownbrix web site, warning the company is running an unlicensed investment business.
Under UK law, investment advisers must register with the FCA before dealing with customers, and the FCA says Ownbrix is unregistered and targeting investors in Britain.
If a customer has a complaint about an unregulated advisor, there is no recourse to the financial ombudsman or the Financial Services Compensation Scheme.
Ownbrix advertises shares for sale in properties to rent mainly in the USA.
After FCA intervention, the Ownbrix web site now flags UK investors cannot join, but still advertises membership starting at £50 and carries a testimonial from a UK investor.
The FCA had also issued a general warning to investors about property crowdfunding platforms.
Crowdfunding is a new phenomenon where entrepreneurs make a pitch on an online platform for funding in return for rewards, equity stakes in a business or profit shares.
Generally, investors who cannot afford to directly invest in buy to let pool their cash with other investors to buy a property.
The FCA, the Council of Mortgage Lenders and the Royal Institution of Chartered Surveyors have all pointed out that no one has seen how property crowdfunding performs in a property downturn.
“The risks include who pays the bills during voids, who manages the charges and repair costs paid by managers and what happens if the market takes a downturn and the property is worth less than the purchase price,” said an FCA spokesman.
“Many of the investors involved could easily find their finances overstretched if house prices fall and we believe the firms seeking investment are failing to point out the problems as well as the benefits.”
The FCA explained property crowdfunding had mushroomed by 170% to £1.3 billion in less than a year.
The FCA and CML both argue that some platforms obscure vital investment information in their pitches to crowdfunders.
“Prospective investors need to read their contracts carefully because we are concerned that some of these firms are dressing up their investment packages without bringing all the financial information about risk and charges before the eyes of investors,” said the FCA spokesman.