Page last updated at 06:33 GMT, Wednesday, 11 February 2009

Home sellers turn to lotteries

For sale signs
In a buyers' market, house lotteries are increasingly popular
Some Londoners caught in a slumping property market are creating private lotteries in a bid to maximise their profits as they offload their properties.

BBC London's Inside Out programme met two people attempting to raise enough money through a lottery to gain the equivalent to a normal sale in better times.

In both cases, the strict rules of the Gambling Commission had to be taken into consideration and the private lotteries have to come complete with skill-testing questions in order to be deemed legitimate.

Rafik Patel's family property development business is selling 50 tickets offering a chance to win a block of 11 apartments in Tower Hamlets, east London.

Mr Patel said the 11 two-bed apartments are collectively worth more than 8.25m.

'Innovative'

"We bought three blocks back in August 2007 and due to the credit crunch, we are being forced to sell one of them," he said, calling the plan "innovative".

He plans to sell a maximum of 200,000 tickets, offering a one in 200,000 chance to win.

Builder Kirk Clugston is also using a lottery to try and get his equity out of a 570,000 refurbished house in Ruislip, west London.

You can't be 100% certain at the moment that you are running a lawful competition
Paul Renney, lawyer
Mr Clugston said while he believes he is following all the necessary rules, he is worried the Gambling Commission will find a way to deem his lottery illegal.

He said his phone calls to the commission did not produce any answers on whether or not his specific lottery plans, complete with three skill-testing questions, are legitimate.

"With the way we're doing it, you have to answer three questions, but we think that's the right way, we're not sure, but we think that is the right way."

He is offering a maximum of 28,000 tickets at 25 each.

Lawyer Paul Renney of Campbell Hooper Solicitors, which advises clients in the gambling industry, warned that the rules remain unclear and that further clarification is required to minimise the risk to sellers.

"You can't be 100% certain at the moment that you are running a lawful competition," he said.

A house lottery attempt by a family in Devon last year was abruptly halted when the commission intervened to say their skill-testing question, which asked the price of an adult fishing licence, was too easy.

Ambiguous rules

The commission said it had failed to meet the criteria of requiring that entrants use their skill, judgement and knowledge which significantly narrows down the number of people who enter.

Estate agent window
Estate agents see the lotteries as potentially expensive 'gimmicks'

Mr Renney said ambiguity is what makes him uneasy about house lotteries and he feels either an act of parliament or legal ruling is needed to provide clarity.

The commission issued a statement on the concept of home lotteries that states: "Homeowners considering such schemes as an alternative to selling their house risk committing a criminal offence if they cross the boundary and stray into offering an illegal lottery.

"Ultimately, it is up to the courts, not the commission, to decide whether an offence has been committed."

The move to house lotteries was labelled a "gimmick" by Nick Salmon, head of the National Association of Estate Agents.

Mr Salmon warned sellers could find themselves bearing extra costs associated with the publicity of a lottery sale.

"If you go to a professional estate agent in the High Street, they will market you home on a no sale, no fee basis," he explained.

"Whereas if you are marketing your house in one of these competitions, you have to bear all the costs and if you don't sell it, you could be well out of pocket."

Inside Out London is on BBC 1 on Wednesday at 1930.



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