Insolvency experts are warning buy to let landlords to be cautious about staking money against buyer funded developments after investors have lost millions of pounds in failed projects.
Hundreds of investors have lost money in the schemes.
In one of the latest to go under, six directors of Absolute Living Developments Ltd were banned from controlling a company for a total of 54 years after an Insolvency Service investigation found they had misused £12 million of client cash.
The Liverpool company took the money as deposits from 300 investors to fund construction of properties that were never built at several developments around the country.
In buyer funded development, builders cut out asking banks for finance. Instead, they pool deposits paid by individual investors that can total up to 80% of the value of a property.
But hundreds of investors have complained to police that they have handed over cash but the promised property has never been finished.
City of London Police say more than 800 fraud allegations adding up to £10 million involving property were made to them between 2015 and 2017.
The Insolvency Service, the government agency that monitors compulsory liquidations and bankruptcies, says in the Absolute Living case, the company signed over assets to a third party and that claims against the firm now total more than £68 million.
The company also demanded completion payments for unfinished homes and failed to protect client money.
Ken Beasley, Official Receiver for the Insolvency Service said:
“This was a complex investigation, considering the amount of money that was invested, not all of the directors were based in the UK and we worked with several other authorities.
“We want to draw attention to rogue directors so we can alert people about the risks involved when investing, while also warning that we will investigate and tackle those that set out to deliberately rip people off by misrepresenting the investment opportunity on offer.”
