Freedom Bay compensation
What is Freedom Bay?
Or, perhaps more to the point, “What was Freedom Bay supposed to be?”
Freedom Bay is an area of land on the island of St Lucia, in the Caribbean. The resort developer’s website notes that “Freedom Bay is a stunning eco-luxury five star Spa resort. The resort comprises one and two bedroom luxury villas, positioned on the beach and hillside.”
The developer is the Malgretoute Hotel Development Company Ltd. Investors’ interests were/are supposed to be protected, including this company holding investors’ money pending completion of their property and presentation of their Fractional Ownership Certificate (see below).
Why the element of doubt?
Because not only has the resort not been completed, but progress appears to have been slow. For example, the target completion date for investors in 2012 and early 2013 was 31st December 2014, yet even two years after this date many properties remain unfinished.
The Freedom Bay proposition
Investors ‘bought’ entitlement to one or more weeks in an apartment or villa in the Freedom Bay resort. The contract termed this purchase as being ‘fractional ownership’ but to almost all intents and purposes it was ‘time share’. Nothing wrong with time share purchases as such, of course, but Freedom Bay is proving to be a dubious investment.
Until the investor’s property was completed they would receive interest at 6% per annum on their invested money.
Large numbers of Freedom Bay investors use their SIPPs
SIPPs (Self-Invested Personal Pensions) often start life as a transfer of a pension fund from a ‘mainstream’ Personal Pension or from a previous employer’s pension scheme, or both. (See SIPP claims for more information). Many of these SIPP members are approached by salespeople with ideas to invest in often more obscure investments that are not regulated and, often, not subject to the UK’s legal system. These proposals usually come with often implausible promises or projections of future investment growth.
‘ALERT’ by the Financial Conduct Authority in January 2013
Formerly the Financial Services Authority, they said: “In particular, we have seen financial advisers moving customers’ retirement savings to self-invested personal pensions (SIPPs) that invest wholly or primarily in high risk, often highly illiquid investments. Examples of these unregulated investments are diamonds, overseas property developments [our italics], store pods…among other non-mainstream propositions.”
In other words, investments such as those in Freedom Bay may not be appropriate for low to medium risk investors.
2016: A Very Bad Year for Freedom Bay
Or, perhaps more accurately, a bad year for Freedom Bay investors.
Freedom Bay: More than two years late
The legal purchase agreement for early investors in the Freedom Bay proposal includes a ‘target completion date’ for their respective properties as being 31st December in either year 2013 or 2014: more than a year after they had made their investment.
Of great importance, the investors’ contract stipulates that if the investor’s property remained incomplete two years after the target completion date the investor could demand a full refund of his or her money, with interest. Thus the first deadline was for completion to take place by 31st December 2015, allowing these investors to demand a refund of their money, plus interest.
The Freedom Bay ‘late’ clause: too good to be true?
A development that runs as far behind as Freedom Bay always poses questions, but the ‘two years late’ money-back clause seems generous in these circumstances. However, it is – or should be – an incentive for the developers to work to agreed timescales.
January 2016: the first Freedom Bay investments were late and unfinished
Even allowing for the two year period of grace for the developers.
So, onwards from January 2016 saw the start of an increasing number of investors demanding the refund of their money through their SIPP provider, as promised in their contract.
However, at least one major SIPP provider has reported a general lack of positive responses to these demands and, even, a lack of constructive communication with Freedom Bay and Heritage Corporate Trustees Ltd (trustees of the Freedom Bay Fractional Ownership Trust).
So, where are we now: the value of Freedom Bay investments with one SIPP provider?
We are expecting the situation to change on a frequent basis but, as at our latest completed claims, the SIPP provider mentioned in the last section is reporting to the Financial Services Compensation Scheme a ‘nil’ valuation of Freedom Bay ‘investments’. At first sight, this might sound like bad news for investors but this nil valuation means that our claim, for clients, is for compensation equal to the purchase price of the fractional investment(s) (‘time shares’).
In simple terms a £30,000 original investment is valued by the SIPP company at ‘nil’ so we claim compensation of £30,000. Claims above £50,000 may be limited to that amount, depending primarily on the status of the adviser who recommended a transfer of previous pension benefits to the SIPP, or recommended the investment, or both…..but only with that particular SIPP provider…and only whilst that provider is treating Freedom Bay investments as having a ‘nil’ value.
Freedom Bay with other SIPP providers
Other SIPP providers are currently taking different approaches to the valuation of Freedom Bay ‘investments’. One, for example, is valuing Freedom Bay holdings at 70% of their purchase price: thus a 30% loss which is, therefore, the current value of a claim for compensation.
Where does all this leave Freedom Bay investors who want to cut their losses?
We can’t provide a simple ‘blanket’ answer for all Freedom Bay investors.
As you can note, above, much depends on the identity of the financial adviser to the transaction, the SIPP provider, and the amount of money invested.
But it is vital to not, the situation today may change tomorrow. You should register your Freedom Bay claim with United Claims Management to receive the most up-to-date advice and service.