What is an Overseas Property Scheme?

Many people are attracted by the idea of investing in overseas properties, as it is claimed they can grow your capital and have higher rental income than properties within the UK. A further advantage is having a holiday home you can visit when it is not rented out.

While there are several options for purchasing property abroad, many people decide to buy new build properties directly from the developer and in several of these situations, the properties have yet to be built, and the money you put in actually funds the development of the properties.

The schemes described above can be very risky, especially since the financial crisis in 2008, which saw several developer companies going bust, without the properties being built. In some instances, the properties were not going to be built in the first place, with the so called developer not even owning the land on which the properties were supposedly to be built.

Harlequin Property

Harlequin Properties may be one of the most well-known overseas property scheme scandal. UK investors were offered the chance to invest in luxury properties (typically apartments or hotels), to be built in the Caribbean. However, it has since been revealed that only a small portion of the properties were actually built and were generating an income.

From the outside, it looked like a great investment opportunity for investors, who were mostly retirement savers wanting to supplement and enhance their pension pots.

Numerous investments were secured through Self Invested Personal Pension Schemes (SIPPs). SIPPs allows the pension holder to choose and manage the investments made. See our SIPPs page for more information.

It is thought that around 3000 investors have been involved with the failed investment, with a total of around £400million being invested. Unfortunately, investors now cannot access their capital, and are finding their investment is making no returns.

Many of the investors were advised to invest by Independent Financial Advisors (IFAs), who failed to consider the suitability of the investment for the customer. It has been argued that the IFAs were pushing schemes such as Harlequin due to the high levels of commission they would receive, in some cases this could be as much as 15%.

Investors into the scheme were not advised that the scheme was unregulated, meaning the Financial Conduct Authority does not recognise or authorise the scheme. While the schemes are still legal within the UK, the promotion of them to them general public is not allowed. They should only be proposed to certain categories of investors including:

  • Certified high net worth investors;
  • Sophisticated investors; and
  • Self-certified sophisticated investors.

Before investing in schemes such as Harlequin, your IFA should be clear about whether they are permitted to promote the scheme to you, and explain why the scheme would be suitable for your particular circumstances.

The UK sales arm of Harlequin Properties is now in liquidation. However, the Financial Services Compensation Scheme (FSCS) has confirmed that IFAs will be legally liable for losses due to negligent financial advice. Should the financial advisor or firm be no longer trading, a claim can still be brought against them.

After a review by the FSCS, they have agreed that they will look into cases and where necessary will provide compensation to investors who have lost out financially. The maximum the FSCS are willing to pay is £50,000, which is standard for investment claims.

To establish a need for compensation, the FSCS have the following guidelines:

  • They must have accepted that the investor is eligible for compensation; and
  • They must be able to quantify the financial losses incurred.

In relation to what is quantifiable the FSCS will look at the difference in value of the investors pension at the time of the transfer, and what the value of the pension would be now if the investor had remained in their pension and not transferred. They will also look in to the costs incurred in transferring from the pension and investing in the SIPP.

Even where losses exceed £50,000, the FSCS will only provide redress up to the maximum of £50,000 in full and final settlement of the claim.

What does this mean for me?

If you have invested in an overseas property scheme, and have realised that your money has disappeared, or the properties have not come to fruition, you should take professional advice.

As property selling schemes are unregulated, it can be difficult for you to recover any monies lost, or even lodge a complaint.

How can we help?

Here at Cooper Stern we are experts at advising individuals and businesses on potentially mis-sold complex financial products.

We offer a no-obligation initial review of a potential Overseas Property claim, and advise on the strengths and weaknesses of making a claim. Following this, we work on a no-win no-fee basis meaning we will only take forward claims we believe have a strong chance of succeeding.

If you feel you have been mis-sold an Overseas Property scheme and want us to look into the matter for you please get in touch. You can fill in our simple online enquiry form and one of our expert advisors will call you back to discuss your mis-sold financial product in more detail. Alternatively, you can call us on 01204 328 287 and we will be more than happy to discuss your queries.

how can we help you?

Have any questions? Get in touch with the Cooper Stern team today by submitting an inquiry online.

There are no substantial up-front costs, and our clients like that. The claims we have settled so far have been on a full redress basis. The banks are misbehaving by making offers to businesses, partially repaying what they have paid, and saying they do not need legal advice and making very low offers. I would urge businesses who are affected to get in touch with us before it is too late.

Dan Fallows
Director, Cooper Stern