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Prepare to lose everything in the property investments built on sand

When Graham Firth saw an advert for an 8 per cent return on an investment in student digs, he thought he had found a great deal. 

More people were going to university than ever before and he was told the Paramount development in Liverpool was not only finished, but occupied. 

However, after the 54-year-old finance director invested £58,500, it emerged that the building was far from complete — and his money vanished. 

Graham is one of thousands of people thought to have lost more than £1billion in unlawful property schemes in recent years, according to legal experts at UCIS Advice Point. 

Finance director Graham Firth invested £58,500 in a student accommodation development in Liverpool – only to find that everything was not as it seemed

The typical £50,000 to £60,000 loss has wiped out the life savings of many, leaving their retirement plans in ruins. 

Devastated investors are desperately trying to recoup their cash by hiring lawyers to sue for compensation. 

Known as unregulated collective investment schemes (UCIS), these deals typically claim to invest in student accommodation, hotels, care homes, offices, storage units and even parking spaces. 

But once bought, the investments, which the City watchdog warns are being illegally marketed, can be almost impossible to sell. 

Many buildings are yet to be built, with the worst schemes being little more than scams. Some falsely claim they are listed with the Land Registry. 

The Financial Conduct Authority (FCA) warns: ‘Some complicated investment opportunities are being unlawfully promoted and sold to members of the public. These schemes can’t be promoted to the public in the UK.’ 

The regulator adds that investors in this type of scheme should be prepared to lose all their money. 

Yet the deals continue to be advertised to unwitting investors by UK-based marketing firms. 

And with interest rates at rock bottom, savers are at increased risk of being lured in by promises of generous returns. 

Danny Law, from London, also invested in the Pinnacle development known as the Paramount, in Liverpool. 

In 2016 he paid £55,000 and was told he would receive an annual return of 9 per cent for five years. But he says he received ‘much lower levels’ for the first year, after which payments ceased completely. 

Pinnacle Student Developments (Liverpool) Ltd went into administration in 2018 and was dissolved in November 2020. 

Neither Danny nor Graham Firth got any money back. A report by administrators Quantuma reveals investors in the scheme have submitted claims worth more than £13million. 

Pinnacle was also responsible for failed developments known as Quadrant, also in Liverpool, and Spectrum in Sheffield. 

Neither were finished and they have since gone into administration or been dissolved, leaving investors with no chance of being repaid by the developers. 

Draining away: Thousands of people are thought to have lost more than £1billion in unlawful property schemes in recent years

Draining away: Thousands of people are thought to have lost more than £1billion in unlawful property schemes in recent years

Danny, a semi-retired IT professional, says: ‘This affects so many people who have lost their life savings that were set aside for retirement or their grandchildren’s university fees, and no one is doing anything to stop it.’ He had also invested about £60,000 in the failed A1 Alpha student accommodation scheme at Park Lane, Sunderland. 

A1 Alpha was responsible for a string of developments around the UK and has also been dissolved, causing as many as 3,000 investors to lose all their money. 

In most cases, investors will have used a solicitor to act for them when purchasing the investment. 

Yet these lawyers failed to warn clients they were investing in unlawful schemes. This was despite governing body, the Solicitors Regulation Authority (SRA) issuing warnings on their website telling law firms not to get involved in these types of transactions.

Sheffield-based litigation specialists SSB Group — often called in to handle failures by other law firms — is dealing with about 150 cases in three crashed Pinnacle schemes. 

But the only real prospect of recovering losses is to sue the solicitors who acted for investors. 

Jeremy Brooke, chief executive of SSB Group, says: ‘We have looked very closely at this and are of the opinion that the lawyers who acted for the investors were negligent and should have recognised these structures were unregulated collective investment schemes. We’re confident of making recoveries for all these clients.’ 

Yet the number of unlawful schemes is growing as unscrupulous developers and agents continue to market unregulated developments. 

Andrew Eastham is a partner in the specialist advisory firm UCIS Advice Point which has been assisting hundreds of investors, including Danny Law. 

 Consumers investing in collective investment schemes should be prepared to lose all their money

He says: ‘We are currently working on at least 250 different sites where developments appear to be unregulated collective investment schemes. And we are seeing new schemes coming to market almost every day.’ 

Top 100 law firm Hugh James is reviewing another scheme thought to be a UCIS, where investors bought units in developments in London and Liverpool from the Daniel Johns Group.

Neil Stockdale, a partner at the firm, says: ‘Our initial investigations lead us to believe that all these clients have been unlawfully sold a UCIS and that the lawyers who acted for them were negligent in a variety of ways.’ 

Hong Kong-based Kevin Leung paid £62,000 for a unit in Daniel Johns’ Regent 88 office block in Liverpool. But he says: ‘Despite my room being registered at the Land Registry it still hasn’t been formed and cannot be identified.’ 

Kevin was promised a ‘guaranteed’ rental return but hasn’t received a single penny and his room still cannot be let. 

An FCA spokesperson says: ‘Collective investment schemes are considered high risk and are aimed at sophisticated and high-net-worth investors. 

‘Consumers investing in them should be prepared to lose all their money. 

‘We recommend investors check the FCA register to find out whether a collective investment scheme is regulated.’ 

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