The past year has seen a rise in the popularity (or at least the media coverage) of “house raffles”. In these, homeowners offer their house as a prize, and either ask people to buy a ticket in a draw, or pay to enter a competition. Most draws stipulate that there has to be a minimum number of entries before the draw can take place. This ensures the vendor gets the desired price for their house and also that they cover their costs.
In one, a house hunter won an 18th-century mansion in Lancashire after buying 20 raffle tickets for £40. Financial difficulties had prompted the vendor to try to sell the property, but after putting it on the market for £800,000 he didn’t receive any offers. The seller decided to raffle the property instead, and aimed to sell 500,000 raffle tickets for £2 each. Each entrant also had to identify the architectural period during which the house was built. Once the seller reached his £1m target, he picked a winner from among the correct entries.
Other house raffles under way offer as a prize a Knightsbridge luxury flat (£5 a ticket), a five-bedroom house in Northamptonshire (£2 a ticket), and a five-bedroom house in Blackheath, south London (£5 a ticket). But what many people don’t realise is that there is a fine line between running a prize draw and running an illegal lottery. The Gambling Commission was concerned enough by the rising interest in the idea to issue a warning last month, urging potential house-rafflers to take legal advice so that they would avoid breaking the law.
A competition is deemed to be a raffle (or “lottery”) if people pay to enter, and the outcome is purely down to chance. Under gambling laws, lotteries are a form of gambling and are regulated by the Gambling Commission. In most cases, organisers looking to run a raffle have to register with their local authority or obtain a licence. But even if this is obtained, lotteries can legally only be run for good causes, such as charities, and not for commercial gain, as is the case with house raffles. Breaking these rules can result in up to 51 weeks’ imprisonment and a fine of up to £5,000.
Homeowners who are determined to sell their property in this way can remain on the right side of the law by ensuring that what they run is actually a “prize draw”. Unlike lotteries, these competitions are not regulated by the Gambling Commission.
The key requirement is that the outcome of the draw must depend on “skill, knowledge, or judgment”, rather than pure luck. So most house raffles involve a multiple choice question, or series of questions, which must be answered correctly to count. Note that the element of skill involved in these questions must be substantial enough to “prevent a significant proportion of people from taking part, or… a significant proportion of people who do take part from receiving a prize”, cautions the Gambling Commission.
So if you’re tempted to go down this route (bearing in mind that it’s time-consuming, there’s no guarantee of selling enough tickets, and timing the purchase of your next house will be tricky), ensure that you avoid falling foul of gambling rules – selling a house is stressful enough without risking prison. If you fancy entering a property raffle, remember – on the off-chance you get lucky – to budget for stamp duty (based on the house’s market rate) and legal fees.
A hip retreat without the celebs
For a one-off payment of £10,000 you can buy a “farmshare” in the Suffolk countryside, says Jenny Coad in the Daily Mail. This will give you access for ten overnight stays per year, every year, in one of Retreat East’s 20 barns or studios, plus a stake in the property that you can pass on to loved ones. You can use up all of your days at once if you want to stage “a big family party”, or purchase more nights for fees of between £150 and £375. Moreover, as with other members’ clubs, you can “pop in for a workout in the gym and use the spa as often as you like… It has a touch of the Cotswolds’ trendy Soho Farmhouse about it, but without all the celebrities and smart prices… It’s what you might call a lifestyle investment.”