Your full refund – less a £1,795 booking fee
P.S. writes: I invested through Property Horizons Group Limited of Milton Keynes in a 25 per cent share in a hotel room to be rented out to oil workers in the US. The scheme was structured through a company called North Dakota Developments. However, I became deeply concerned when I received a letter from Property Horizons, revealing that the Financial Conduct Authority had ruled that the scheme was unauthorised and that investors should be refunded.
I decided to take the refund, only to find that Property Horizons intended to keep back £1,795. I panicked as I could not afford to lose this, so I said I would continue with the investment. PROPERTY Horizons Group is not huge, but it is not a fly-by-night company either. It has been around since 2008, and says: ‘We pride ourselves on being able to provide exclusive access to property investments to our valued clients.’
The company is run by Robert Gavin, who describes himself as a ‘serial entrepreneur’, and Danny Hogan, who oversees the day-to-day running of the business.
North Dakota Developments was set up in the US in 2012, it says, ‘to design and build accommodation targeted at the oil and service sector workers in the Bakken region, thus addressing the area’s massive undersupply of suitable accommodation.’ Its directors are, not surprisingly, Gavin and Hogan.
Now, there is nothing wrong with investing in property. There is nothing wrong in advertising such investments. And there is nothing wrong in recommending investment in a scheme that happens to have the same bosses as the firm doing the recommending. So what went so badly wrong that the FCA stepped in and ordered the two bosses to offer everyone their money back?
The answer is that North Dakota was an unlicensed unit trust. In legal terms, it was a ‘Collective Investment Scheme’. You were not being sold an asset you could take away. You were not even being sold a building or a piece of land that had its own title deed. Instead, you bought a quarter of one room in a large building, with no separate title deed. You were lumped with other investors in a scheme where Gavin and Hogan called the shots. And since they were never authorised by the FCA, the scheme was illegal.
The FCA could have prosecuted the pair. The penalty for running an unlicensed investment scheme is up to two years in jail. Instead, it simply told the ‘Milton Keynes Two’ to stop breaking the law and offer everyone a full refund. If they had any sense, they would have agreed without a second thought. Foolishly though, they held back £1,795 for themselves and their British company, claiming it was a ‘booking fee’. This meant they would escape prosecution yet emerge with a profit.
The FCA says it was unaware of the fee. One official said that its instruction was ‘to put consumers back in the position they would have been in had they never invested with the firm.’ That would include repaying the £1,795.
So, I asked Property Horizon’s bosses what they were playing at. On May 1 they said they would give me an answer the next week. On May 9 they said they were drafting a response and would comment ‘as soon as possible’. On May 13 they said they had ‘signed off on the response’ and would send it that day.
Later on May 13 they decided their reply would come on May 15. And when May 15 arrived, they requested a postponement. And on May 19, they finally issued an official comment: ‘We will not at this time be sending a reply.’
According to Property Horizons, you had changed your mind. You did not want your letter published. In fact, you were sending a new letter. And you received an email from North Dakota, saying: ‘Can you email Tony your new letter as he is being aggressive.’ Then last Tuesday I received an email that looked as if it came from you. It referred to a refund offer, but with no details. Curiously though, it came from the email address of a London lawyer.
The bottom line is that Property Horizons has backed down. You are getting a full refund, including your £1,795, so in total you can expect about £8,500, depending on currency exchange rates.
Why the company marketed an illegal scheme remains a mystery the bosses failed to explain. Why they clung on to £1,795 is also a mystery. And why it takes a Buckinghamshire firm to spot a gap in the property market in North Dakota is an even bigger puzzle that future investors might consider before signing on the dotted line.