THE dangers of putting money into get-rich-quick property investment schemes have been highlighted after it emerged that a number of former clients are seeking to recover large sums from companies run by Spencer Michael, whose Freedom2Fortune seminar was featured in Cash on 6 February.
Since that seminar, The Observer has talked to several people who invested substantial sums - in some cases tens of thousands of pounds - with Michael's company. Some were merely disappointed by the content of courses for which they had paid between £995 and £3,995. In two cases, clients who paid large sums of money to enroll on a programme that promised to help them build a substantial property portfolio have subsequently tried to obtain a refund, with limited or no success.
One, who asked that his name be withheld, signed up to Spencer Michael Consultancy's Instant Millionaire Standard Programme on 14 November last year, paying £31,000 towards the £90,000 cost of the programme plus a £4,000 loan arrangement fee. The invoice stated that he was due to pay a second instalment of £14,000 within 10 days; the balance would be met by a £45,000 'loan note' from Spencer Michael Consultancy.
He says his Contract for Services, which he signed on 14 November, stated that within three months, SMC would 'facilitate and arrange' the purchase of residential property worth between £700,000 and £800,000 in which his equity would be 'approximately £112,500'. He says the contract also stated: 'The location, value, size and type of property shall primarily be at the discretion of the Consultant. However, the Client's prior opinion shall be sought.'
Michael had shown the client buy-to-let property at a new development, The Connection in Balham, south London, but he emailed his reservations about this and did not sign any paperwork relating to the purchase of this property. The client flew to the United States on 15 November to take a new job there, but when he arrived decided not to take it up. On 22 November he explained to Spencer Michael Consultancy that he would now be unable to obtain a remortgage on his home in Edinburgh to raise money for the property investment. He therefore wished to withdraw from the Instant Millionaire Programme and asked for his money to be refunded. A letter from Spencer Michael's legal representative, Neil Cloutman of Tudor Rose Solicitors in Abergavenny, on 1 December, said: 'Upon signing the agreement you received a letter confirming that two plots in Balham had been allocated to you. In reliance of this SMC had made commitments in respect of these plots - which makes refunds difficult as expenses have been incurred and commitments entered into.'
The client denies ever receiving this letter. He was offered some incentives to continue with the programme but declined, saying that his relationship with SMC had 'broken down'. He says the contract he signed states: 'By making the initial payment and any further payments for a property purchase, the Client agrees that once the allo cated property has been exchanged by the Consultant on Client's (sic) behalf, the payments become non-refundable.'
He says no exchange of contracts took place - and would have been impossible since he did not have mortgage funds in place. But the contract concludes: 'No refunds of the Purchase price will be made for any reason save with the written agreement of the Consultant.'
A couple, former clients of Spencer Michael who also asked that their names be withheld, paid a total of £27,770 to one of Michael's other companies, St Pauls Property Developments, after attending his No Money Down seminar on 31 July last year.
They were offered properties, one in Norbury and the other in Balham, priced at £224,700 and £350,000 respectively. They agreed to the purchases and believed the transactions were going ahead. But on 23 January this year, Michael called the couple to a meeting where he announced that both properties were now unavailable and offered an alternative deal which involved them borrowing an extra £25,000 from him at 9.9 per cent APR. 'We were not expecting to be offered a new deal and we were very disappointed,' they told The Observer . 'At that point he said: "You can get your peanuts back" - we were really offended.'
The couple sent Michael a text message on 24 January asking for their money to be refunded but are still waiting for the majority of it. On 8 March, after repeated requests for a refund, another of Michael's legal representatives, David Price Solicitors & Advocates, wrote 'to confirm that St Pauls Property Developments will refund your initial investment of £27,770 and to set out proposals for payment'.
The letter included a cheque for £7,770 and a proposal that the balance would be paid in three instalments over the following six months. The couple have cashed this cheque but want the rest of their money refunded immediately and with interest. They wrote: 'We paid money to secure two properties in Norbury and Balham which your clients failed to secure. As far as we are concerned our money is available as it was not used for its intended purpose.'
Two other former clients of Spencer Michael's companies have told The Observer - one via a legal representative - that they are seeking refunds. Last week, Spencer Michael's property investment companies were featured on the BBC consumer programme Watchdog .
Spencer Michael initially refused to speak to The Observer about the problems experienced by some of his clients. Last week he failed to answer a number of specific questions sent to him by email but provided a statement through his solicitors: 'Any allegations that we have refused to return deposits to our customers are strenuously denied. We have made proposals and payments to refund any customers that have sought to withdraw from our property investment schemes.
'We would strongly refute any suggestion that we deal with our customers' funds in any way inappropriately. It is often the case that we will pay the exchange deposit on behalf of our customers and any monies paid by the customers simply repay the company.
'We have many satisfied customers who can attest to the professional, courteous and supportive way in which their property deals have been undertaken by us.'
Alan Finch, a financial adviser from Wallingford-based Millfield Parker Financial who works closely with Michael and arranges mortgages for his clients, said: 'The buy-to-let market is not regulated, but my clients have been given a full Fact Find in every case.'
He declined to answer other questions - such as why people on relatively modest incomes were being advised to invest large sums in investment property - until he had spoken to his company's compliance officer.
• This article was amended on 19 November 2015 to remove a name.
