Homeowners who try to sell their houses by handing out raffle tickets to potential buyers could face jail if they bungle the draw.
Desperate sellers who are struggling to get the price they want for their properties through estate agents are turning to so-called home raffles. But Money Mail can reveal that some of these sellers are falling foul of the complex rules that govern these types of competitions.
The Gambling Commission, the regulator for lotteries and other forms of betting, says it has seen a rise in the popularity of house raffles and is concerned that many homeowners do not realise they are breaking the law.
It has been in touch with 11 property sellers in the past few months who have all since withdrawn their raffles or been forced to change the terms and conditions of their competitions.
TARGET PRICE: £2MILLION – Orchardton Castle in South-West Scotland is being raffled off
WHAT EXACTLY IS A HOME RAFFLE?
A raffle, or lottery, is where you pay to enter a competition and the result is based purely on chance —like a tombola.
The only difference with a home raffle is that instead of a nice bottle of wine or cuddly toy, the prize is someone’s house.
For the seller, the idea is to flog enough raffle tickets to cover their asking price and legal costs. Most set up a website to advertise their competition and charge between £2 and £5 a ticket in order to attract as many entrants as possible. Once they hit their target total, they then select a lucky winner at random.
But while it might sound simple, it isn’t. There are strict rules about how raffles and lotteries can be run and who can organise them.
You cannot, for example, run a lottery for your own gain. It must be for a good cause and you may need a special licence. This means that if you set up a raffle based only on chance, it is likely to be deemed an illegal lottery and shut down.
This leaves you with two options.
The first is to run a prize draw where you can charge people whatever you like to enter as long as there is a test of skill involved.
Susan DeVere, 56, launched a prize draw in September
This means you must set a question sufficiently difficult that it will prevent a significant proportion of the population from entering.
Alternatively, you can run a free draw. If you do this, you are allowed to sell tickets but you must also offer a free entry option such as sending in a postcard, for example. The free entry route must also be properly publicised. It cannot be buried in the small print.
Television shows get away with advertising competitions that have a very easy question because they are actually free draws.
The question is just included to make the competition more fun.
If you break the Gambling Commission’s rules you could face a fine of up to £5,000 or up to 51 weeks in prison. You could also be hit by a 12 per cent per ticket charge by the taxman. So if you sell 50,000 tickets at £2 each you face a £12,000 bill.
Sarah Gardner, executive director of the Gambling Commission, says: ‘We don’t want to see members of the public getting into trouble because they don’t understand the rules about lotteries, so we strongly urge people to read the advice on our website and take legal advice.
‘If you run an illegal lottery you could face prosecution and, if convicted, a fine or imprisonment.’
The advertising watchdog also has strict rules regarding how raffles can be advertised.
BEWARE STRICT PAYMENT RULES
And many online payment systems such as PayPal are now refusing to allow homeowners to use their service to collect ticket money.
Sellers can ask entrants to pay the money direct into their bank account but many people are reluctant to do this as they will not get their money back should the competition turn out to be a scam.
You may also be able to accept debit and credit cards, but you will need to find a company willing to process these payments for you.
Renu Qadri, 49, a former antiques dealer, wants to move to a smaller property because she can longer work and is struggling to pay the mortgage. She tried to sell her five-bedroom flat in Blackheath, South- East London, through an estate agent for £1.3 million but got only one viewing in six months.
TARGET PRICE: £2.5M – Renu Qadri’s five-bedroom flat in Blackheath, South-East London
She tried lowering her asking price by £50,000 but still had no offers. So after reading about other sellers raffling their homes, Renu decided to give it a try in May last year. She had hoped to raise £2.5million by selling 500,000 tickets at £5 each. This would cover her asking price, legal and administration costs and leave some cash for charity.
But within 48 hours of setting up a website, ‘Win a luxurious London home’, she received an email from the Royal Borough of Greenwich Council saying she was breaking the Gambling Commission’s rules by not including a free entry option for applicants.
Renu quickly corrected the error and added a ‘thank you’ message to the council for its support.
But she was told to remove this as the council didn’t want to be seen to be endorsing the competition.
A week later, after selling £250,000 of tickets, the online payment system she used, PayPal, froze her account and refunded all the money to those who’d bought tickets.
PayPal says: ‘These prize draws are difficult to carry out successfully and carry considerable risks, such as the possibility that the property is not accurately described; or the draw is not conducted fairly; or entries are made from countries where such draws are unlawful. We have decided not to allow PayPal to be used for house prize draws in the UK.’
Renu then sold another £7,000 worth of tickets through Eventbrite, a website set up to sell tickets for lectures, concerts and other events.
But she was soon told the raffle didn’t adhere to the site’s rules and, again, the tickets were refunded.
A spokesman for Eventbrite says: ‘We have recently clarified our stance in our terms of service and will not support raffles in the future.’
Then in October the Advertising Standards Authority wrote to say it was an investigating a complaint about her raffle. It later said that her website had broken its promotions rules by offering a cash alternative prize that wasn’t equal to the value of ‘a luxurious London home’.
In the terms of her competition, Renu had said that if she didn’t raise enough money to cover her asking price she would give the winner the cash collected minus 15 per cent to cover her costs. She had also broken the rules by failing to set a closing date.
Renu also ran into trouble with the charities she hoped to support. Most enforce strict rules around how their names are used and both Psoriasis Association and Grief Encounter, a bereavement charity, asked her to remove their names from her site.
Renu continues to persevere, with her house raffle now ending in May.
But she says: ‘I would never do it again and wouldn’t recommend that anyone sells their home in this way’.
I RAISED NEARLY £900,000 THIS WAY
But some sellers have had success. In August, Dunstan Low, 37, raised nearly £900,000 (after costs) when he raffled his six-bedroom country mansion in Lancashire.
He had previously put 18th century Melling Manor on the market for £800,000 but received no offers.
Marie Segar, 51, from Warrington, won the property after buying £20 worth of £2 tickets. She did not have to pay stamp duty because the only money that changed hands was for the raffle tickets.
Mr Low says: ‘It was quite a tense time but it all paid off in the end. My wife Natasha and I have now moved to a smaller house mortgage-free, which is a relief as we were struggling with the bills.’
Helen and Gary Weller launched a spot-the-ball competition to win their five-bedroom home
His success has prompted other hopeful owners to attempt the same feat. In October, Helen and Gary Weller, both aged 61, launched a spot-the-ball competition to win their five-bedroom home in Caversham, Berkshire.
It is a game of skill so they do not need to offer free entry. Applicants must pinpoint where the centre of a computer-generated ball should be. A panel of judges will then determine the true centre and whoever is closest will win.
It costs £25 to enter plus a 25p transaction fee. The Wellers hope to attract 200,000 entrants and raise £5million. Around £75,000 will go on legal and administration fees. If they haven’t met their target they will extend the closing date to June.
If they still haven’t raised enough they will keep the house and give the winner 75 per cent of the proceeds.
In a bid to keep things simple they have outsourced the process to a company that specialises in running games, called Tentacle Solutions.
TARGET PRICE: £5MILLION – Helen and Gary Weller’s five-bedroom house in Caversham, Berks
Helen, a retired hairdresser who designed the home herself, says: ‘If we get a winner who wouldn’t otherwise have been able to afford a house like this it will all have been worthwhile, but I wouldn’t do it again. I’ve had to put up with a lot of online abuse with people accusing me of running a scam.’
Author Susan DeVere, 56, launched a prize draw in September after struggling to sell her 19th Century Scottish castle. She is hoping to raise £2million, some of which she will give to charity.
She bought it for £450,000 around 14 years ago and it costs around £10,000 a year to run.
Tickets are £5 each. She is offering two free entries if you buy one of her books on Amazon, or you can pay by bank transfer. There is also a free postal entry option.
HELL WOULD BE MORE FUN
Roger Hickman, 73, a retired marketing executive who acquired the title Lord of the Manor with some land he bought in Upton, Berkshire, has stark advice for anyone considering raffling their home: ‘Go and rot in hell — it’ll be more fun,’ he says.
He set up a free draw to win his flat in Knightsbridge in July. Entrants could either purchase a ticket for £5 or enter for free by post.
He had been trying to sell his two-bedroom flat in West London for 18 months but had not received any offers at the £950,000 asking price.
Buyers had likely been deterred because of a complication with the lease. The main part of the flat is covered by a lease that has 71 years to run, but the bedroom had been extended into the basement of the property and this lease only has 11 years left.
Someone had offered £850,000, which Roger says now he wishes he had accepted.
Like Renu, he also ran into problems with PayPal and the Gambling Commission as well as the advertising watchdog.
He had also offered entrants the option of paying by bank transfer but someone tried to charge their power bill to the account he’d set up for this purpose.
And some of the free entries he had been sent were stopped by the Royal Mail because the sender had used counterfeit stamps.
Roger had hoped to sell 300,000 tickets, which at £5 a go would bring in £1.5million. But when the raffle ended in November, he had sold only 9,000 tickets. He had also received more than 4,000 free postal entries.
Under a clause in the competition, if he didn’t reach a minimum of 200,000 tickets (£1million), he would instead give away a cash prize equivalent to the amount raised minus costs and a 5 per cent donation to charity.
Following a draw held at his solicitor’s office, the winner took away £28,000 and he donated £2,900 to homeless charities.
Roger says: ‘The experience has been a salutary lesson to me. I was made to feel like I was scamming the public.’
l.milner@dailymail.co.uk