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Last Updated: Wednesday, 11 May, 2005, 14:19 GMT 15:19 UK
Crackdown on buy-to-let schemes
Flats under construction
Many property schemes invest in new-build developments
Five companies offering get-rich-quick schemes to people wanting to get into the buy-to-let market have been shut down by the government.

Some of the firms offered to help investors build up a property portfolio worth 1m in one year, in return for many thousands of pounds worth of fees.

But none of the investors achieved a 1m portfolio, and many lost tens of thousands of pounds.

The government said the schemes were "completely misleading".

Wound up

The crackdown followed an investigation by the newly-named Department of Productivity, Energy and Industry (DPEI).

The companies - Sterling Mansion, Mansion Investments, CM2 Services, and two related companies Furniture Right and Seal Properties Ltd - were wound up by the High Court in London on Wednesday.

When a property investment scheme... is offering easy access to vast riches, consumers should immediately look for the catch
Graham Chase, Royal Institution of Chartered Surveyors

The DPEI said the companies ran schemes with common characteristics, which usually involved people paying thousands of pounds to join a scheme which offered the chance to build up property worth 1m.

At sales meetings, people were told they could buy new-build homes at a discount, the DPEI said, and the firms offered to arrange mortgages for investors which would be covered by the rental income.

However, the DPEI said most of the time clients lost their joining fees and ended up with no property.

"These companies knew that their clients, who had all invested substantial amounts of money, couldn't make anything like the returns that were promised," said DPEI minister Gerry Sutcliffe.

"The schemes were completely misleading and set up with the sole aim of parting people from their money."

Action against three other companies - Portfolios of Distinction, Turningpoint Seminars and SMI (Overseas) - was adjourned.

Check it out

The Royal Institution of Chartered Surveyors (Rics) said that people needed to use their common sense when faced with schemes that appear to offer high returns at little cost.

"When a property investment scheme or training course is offering easy access to vast riches, consumers should immediately look for the catch," said Graham Chase, Rics vice-president.

"Only by checking that the service is being provided by reputable, properly-regulated professionals can customers ensure they are getting value for money and have a route of redress if something goes wrong."

Invest Track group, one of the UK's biggest property investment firms, said the government and Financial Services Authority (FSA) should regulate the industry.

The company charges 2,500 for a two-day seminar and 6,000 to join its investment service, but says its fees are more transparent than its rivals.

"We are very concerned about the very poor quality of service being offered by many companies operating in this sector," said Anthony McKay, Inside Track group's chief operating officer.

"The reputation of our own business has been damaged by association with the fly-by-night element of the sector and we're keen to see those opportunities regulated out of existence."

"It's high time the bad apples were exposed for what they are."

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