The Great British Property Scam Pt 2
It may now seem like a distant memory, but The Great British Property Scam has many of its roots in the financial crisis of 2008.
When Lehman Brothers filed for bankruptcy on September 15, 2008 hundreds of employees, mostly dressed in business suits, left the bank's offices one by one, carrying their careers in cardboard boxes. Television screens around the world flashed up images of angry staff walking out of expensive office buildings with little to show for their commitment and no idea of what the future held for them.
It was a sombre reminder that nothing lasts forever even in the wealthy financial and investment world, but it was merely the earthquake that caused a tsunami and few if any saw it was coming.
In the days and weeks that followed, other banks went down the same slippery slope into administration, bankruptcy or if they were fortunate, takeover. The result saw the beginning of the worst credit crunch since The Great Depression of the 1930`s. This time it was all about property and how great swathes of it had been over valued by so called experts.
Banks and lenders quickly drew in their horns. Lending products disappeared from brokers screens and borrowing criteria was stringently reviewed. Those individual reviews by every recognised lender tightened the criteria to such a degree that it became almost impossible to be approved for a loan. The banks had simply pulled down the shutters while continuing to tell the world at large that they were still open for business.
This resulted in virtually no lending and therefore no dealing in property. No building or developing. Renovations and new build projects remained unfinished or half built. Plots of development land rarely saw the sharp end of a spade. The property industry was brought to its knees.
However, it is an industry that doesn`t only employ bricklayers and builders. It is supported by architects, surveyors, solicitor`s, lenders, estate agents and brokers. The staff exit from each of those sectors was as busy as that at Lehman Brothers. One Small commercial finance broker said that at the time of the crisis they had around £100m of deals they were working on and that were previously capable of being financed. Not a single deal was completed due to the withdrawal of bank funding.
All those professionals needed to work. They needed to feed families and pay mortgages. The mass exodus from the relative safety of professional life therefore produced another driving force in the development of these new scams as some of the more adventurous individuals were prepared to take greater risks.
The legal sector was hit particularly hard. With impending legislation already threatening to all but wipe out the claim’s arena, a lucrative area of work for lawyers, large numbers of the profession were desperately trying to find alternative work.
Necessity and creativity, however, will often produce a result, particularly when opportunity comes knocking. It did for a relatively small number of law firms. These pliable lawyers went on to make a name for themselves within a murky pool of developers who were selling hotel rooms, student pods and care homes. The vast majority were unregulated collective investment schemes (UCIS).