10:26 AM, 18th May 2012, About 12 years ago
A property firm’s claims that buy to let was a safe alternative to keeping money in a savings account were misleading, ruled the Advertising Standards Authority.
THE ASA has banned the firm, Aldermartin Baines and Cuthbert, estate agents in Bushey Heath, Hertfordshire, from running the ads and ordered them to only broadcast unregulated investment ads on specialist financial media.
The ASA was adjudicating on three complaints received about the ads broadcast in January.
A voice-over in the ad stated: “The bank may be the safest place for your money, but Aldermartin Baines and Cuthbert estate agents would argue that it’s not the most sensible place.
“If you have cash on deposit in the bank, you may be getting only half a per cent interest on your money and inflation will be working against you by eroding your savings. So, what’s the alternative?
“Here at ABC Estates we’d like to suggest investing in property, good old bricks and mortar. Put your savings in a buy-to-let investment instead and you could generate a five per cent return on your investment, maybe more. Inflation would then actually work for you by eroding the value of your mortgage debt.”
The ASA considered the risks involved in buy to let were not limited to tenants not paying their rent, and, felt the impression portrayed by the ad presented buy-to-let as an alternative, or a preferable option, to saving.
“We considered the ad misleadingly presented buy-to-let investment as low risk, in that it suggested it was an alternative, or a preferable option, to saving and did not make clear the potential risks associated with such an investment,” said the ASA.
“Ads for investments not regulated or permitted under the Financial Services and Markets Act 2000 (FSMA) may be broadcast on specialised financial channels, stations or programming only. Buy-to-let is not regulated under FSMA but considered the ad, which appeared on a non-specialist channel and emphasised an investment opportunity, promoted an investment. Because the ad promoted an investment not regulated by FSMA, we considered it should not have been broadcast on a non-specialist channel, regardless of whether or not it made clear the potential risks involved in buy-to-let investment.”
Aldermartin Baines & Cuthbert told the ASA that they offered properties with yields between 7% and 12% but had been guided to suggest a 5% yield, which was very conservative and definitely deliverable.
“We do not accept the ad misleadingly presented buy-to-let as a low risk investment. The ad did not mention ‘low risk’ but focused on inflation eroding the value of money, either on deposit or as the debt of a mortgage. This was obvious and would not mislead to anyone. The investments were low risk, because they gave an independent insurance backed rent guarantee,” the ASA was told.
“If a deal was considered risky, banks would not lend on it particularly in the current economic climate.”