Insolvency experts warn 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 disqualified for a combined 54 years after an Insolvency Service investigation found they had misused £12 million of client cash: Kien Cheong Yew for 12 years; Ameerali Bin Abas, Andrea Nicole Pacquiao Pieter, Adrianne Mei Kwan Nyau and Chi Yuen Leong for nine years each; and Daniel Mark Harrison for six years.
The Liverpool company took deposits from 300 investors to fund the construction of properties that were never built in several developments around the country.
In buyer-funded development, builders cut out banks when asking for finance. Instead, they pool deposits from individual investors, which can total up to 80% of a property's value. But hundreds of investors have complained to police that they handed over cash, but the promised property was never finished.
The City of London Police says more than 800 fraud allegations involving property, totalling £10 million, 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 that the company signed over assets to a third party and 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.”
