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May 3, 2013 6:22 pm
Investors in troubled overseas luxury resort developer Harlequin hope to agree a rescue plan with the firm to keep alive their hopes of getting money back on their investments.
Lawyers acting for a group of about 1,000 British investors said they were seeking to negotiate a “sensible solution” with Harlequin, whose UK sales arm filed for administration last week.
In all, an estimated 3,000 UK investors had invested a total of £250m-£300m off-plan in luxury properties, which Harlequin was developing throughout the Caribbean and other resort locations.
Many investors had re-mortgaged their homes, taken out personal loans or used retirement savings to finance deposits on the properties, on the basis that they would provide rental income once completed.
But lawyers acting for investor groups claim that only 300 of the 6,000 off-plan resort properties sold have actually been built, and many of those investors now want their deposit money back.
Erica Broughton, 50, and her husband, John, 53, from the Wigan area, want a refund on a £37,500 investment made through their pension fund in 2009.
“John was advised to transfer all his pension savings into a self-invested personal pension (Sipp) to invest in a Harlequin unit,” says Mrs Broughton.
“It has still not been built. We want our money back. We don’t have any other pension savings as I am self-employed and I haven’t got a pension either. If we don’t get our money back we’ll have to work much longer.”
Lawyers acting for investors now say they are working on reaching a “sensible” solution with Harlequin.
“There’s a deep series of negotiations between the investor representatives and the company to get a resolution to get the machine working again,” said Gareth Fatchett, a solicitor with Regulatory Legal.
“That negotiation is genuine and has a restructure of the company in mind, so investors can either be given the choice to complete or get a refund and leave.”
Harlequin, whose UK sales arm Harlequin Management Services (South East) Ltd operates as a separate company, said this week that it was “actively seeking external finance in order to increase the speed of construction in the Caribbean, which will generate further income through completions going forward.”
“This should have a positive effect for all purchasers and should not be perceived as a negative step,” it added.
David Ames, company chairman, met with almost 2,000 UK investors last week, but the company has made it clear that in the short term full refund payments cannot be made.
“However, we are optimistic that we can soon announce refund programmes for the relatively small number who, within their contractual rights, don’t want to wait for their property investment to be completed,” added Harlequin.
Investors have also commenced action against the financial advisers who recommended transfers and switches from pension funds into Sipps, to invest in Harlequin property.
In January this year, the Financial Services Authority, now succeeded by the Financial Conduct Authority, issued an alert to those recommending sales of Harlequin property investments, urging them to ensure they were suitable for their clients. Harlequin was not involved in the direct sales of its investments to clients.
“Quite a lot of complaints have been issued against individual financial advisers for poor advice,” added Fatchett.
“We are talking about clients who were civil servants, with good final salary guaranteed pensions, who were advised to transfer into Sipps to invest in overseas property.”
Complaints are also being lodged with dozens of Sipp providers who allowed the investments, considered non-mainstream, into their schemes.
The Financial Ombudsman Service, which deals with disputes between businesses and their customers, says it is also beginning to see complaints related to sales of Harlequin investments.
The Serious Fraud Office is also continuing to investigate complaints against Harlequin relating to its property developments in the Caribbean and other resort locations. The company says these complaints are “completely unfounded”.
Harlequin is taking legal action in an Irish court against a former contractor of Buccament Bay Resort, in St Vincent, for the alleged fraudulent misappropriation of at least $13m from development funds.
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