Are You Allowed To Buy Or Sell A House In A Raffle?
If you spend much time online, you’ll doubtless have seen countless examples of raffles that can see you walk away with a home worth a huge amount of money. It has become a popular way for people to look to sell their house for the price that they want rather than depending on estate agents to get them an offer that they deem to be acceptable, for example, as well as a good way of making money for charity. It is not necessarily an easy thing to do, however, given the pressure to ensure that everything is above board and legal.
Anyone that has ever looked to buy or sell a house will know that the property makes is one filled with fluctuations. Even the time of year that you’re looking to sell your property can effect how popular it is likely to be with potential house buyers. As a result, turning to the world of property raffles is a way of trying to get rid of your house without having to deal with the stresses and strains of offers, negotiations and solicitors. Instead, there are different set of stresses that come into play, including when you don’t sell the number of tickets you were hoping to.
Is It Legal?
Let’s start with the most obvious question of all: is it legal to raffle your house? The short answer is ‘yes’, but there are a number of caveats that come with that. In 2007, for example, the United Kingdom Gambling Commission issued a warning that said that an improperly organised raffle ran the risk of becoming an illegal lottery, meaning that the person responsible will have fallen foul of the UKGC’s licensing laws and would have to face the consequences. Raffling your house is entirely legal, provided you do it correctly.
Those wishing to raffle their house need to ensure that they seek legal advice before doing so, given the wealth of pitfalls that can be fallen into. As an example, have you figured out what will happen about the stamp duty? It is not uncommon for someone looking to set up a property raffle to discover that it is actually much more complicated than they realised. There are expenses to take into account, to say nothing of the fact that the sellers could be issued with a hefty fine or even a prison sentence if they’ve got the details of their raffle wrong.
How The Draws Work
Now that we know that it is legal to engage in a house raffle, let’s have a look at how such a draw would work in practice. After you’ve engaged legal counsel, the next thing that you’ll want to do is to figure out how much money you want to raise in order to trigger the giving away of your house. Let’s imagine that your house is worth £250,000 and so you want to raise £300,000 with the aim of giving £25,000 to charity once the draw is complete and using the other £25,000 to cover administrative costs. This is a necessary addition to proceedings because it changes the draw from a lottery to a raffle.
It is illegal to run a lottery for profit, so people get around falling foul of that particular legal conundrum by either donating a portion of the money raised to charity or else make it a competition. This can be done by getting interested parties to answer a question before they can buy their tickets. Once that is done, you need to decide upon the minimum amount of money that you want to raise before selling your house. If it’s worth £275,000 and there are £30,000 in legal and administrative costs, say, you don’t want to give your house away after only taking in £200,000 in ticket sales.
As a result, the thing you’ll want to do is to figure out what will happen if you don’t raise enough money through ticket sales. It is common in such circumstances for the terms and conditions of the raffle to say that an amount of money will be given as the prize, such as 75% of ticket sales. This means that you can have a prize on offer but aren’t locked in to giving away your house or having to organise the return of all of the money you’ve taken in ticket sales. The next question to ask is how much you want tickets to cost and how many you are looking to sell.
If you want to raise £300,000 in ticket sales and think that £10 per ticket is a decent entry point, you would need to sell 30,000 tickets. As a result, you’ll have to ensure that you get good publicity for your house sale, given that knocking door-to-door around the neighbourhood is unlikely to do the trick. Whether you aim to get social media buzz on your side or speak to traditional newspapers about it, you need as many people as possible to hear about your house raffle in order to sell the number of tickets required.
At this point, it is common for people to hire an outside company to actually run the draw. The Gambling Commission has licensed a wealth of companies to run Random Number Generators that can be used for just such a thing, so getting in touch with one of them is the way to go. At this point, you can draw the winning ticket and get in touch with the lucky person to tell them what they’ve won. Have you raised enough money to mean that it’s your house that is up for grabs, or will they be receiving the compensation prize?
In many ways, a property raffle is no different to the sort of raffle that you’d enter at your child’s school or at a church fete. The same principles apply, with tickets being sold, a draw being made an a winner being awarded a prize. The only major difference is the scale, which is partially what dictates the need for lawyers and solicitors to get involved. The winner might have to pay Stamp Duty, for example, which can be prohibitive if the property was expensive. The Capital Gains Tax is also an interesting point to think about.
According to Her Majesty’s Revenue & Customs, the Capital Gains Tax payable on a house is based on its value on the open market. As a result, if a person were to sell their current house immediately upon winning the house in the raffle, they’d likely not have to pay any Capital Gains Tax. It is, as you might imagine, complicated and there’s no easy way to go about either selling your house via a raffle or buying a house courtesy of a raffle. You might end up spending hundreds of pounds buying tickets and never winning anything.
Is It Gambling?
As we’ve touched on elsewhere in this piece, selling your house via a raffle is not gambling, provided the raffle is done correctly. Here’s the exact thing that the Gambling Commission has to say about the matter:
“Many people running raffles on high value items such as houses and cars do so by running free draws or prize competitions. These are not forms of gambling and we do not regulate them.”
In other words, you need to work hard to ensure that you’re not running an illegal lottery, which would become the UKGC’s remit and see you in a situation where you might end up paying a fine or even going to prison. If you find yourself in a situation where you’re not convinced by the legality of a house raffle, the best thing to do is to contact the Advertising Standards Agency, given that the Gambling Commission will simply tell you that it isn’t any of their business.
When Things Go Wrong
Because of the precarious nature of house raffles, things can go wrong from time to time. In 2018, for example, a millionaire couple called Mark and Sharon Beresford decided to raffle their home, which was valued at £3 million. They wanted to sell 250,000 tickets at £25 per ticket, which would have seen them raise £6.25 million. In the end, however, they only managed to sell 30,000 tickets, raising just £750,000. The terms and conditions of the Win A Mega Home competition stated that the winner would take home a cash prize if fewer than 120,000 tickets were sold.
As a result, Carina Alcock was informed that she would receive 75% of the value of the ticket sales after administrative costs, which amounted to £110,000. Questions were asked on account of the fact that the couple seemed to be claiming that the administrative costs amounted to around £400,000, but they were acting in accordance to their own terms and conditions. Anger was stoked even further a few months later when the couple put the property up for sale for £2.5 million. This was in the wake of a Gambling Commission investigation into the original competition.
The Apology For Late Refunds
In 2021, businessman Philip Leckie released an apology after it emerged that some people that had entered the competition to win his £750,000 house in Airdrie had yet to be refunded. The 51-year-old organised a prize draw for his Scottish five-bedroom house but pulled the draw just days before it was due to take place. He blamed his decision to cancel the draw on a lack of ticket sales, meaning that anyone that had bought a ticket was entitled to a refund. The problem was that not everyone was on the receiving end of getting their money back.
Leckie, who had moved to Singapore, said that most of the delayed refunds were owing to errors such as the card used to buy the original ticket having expired or the email address given when entering the competition didn’t match the PayPal account that paid for the entry ticket. He claimed that anyone that had provided him with the correct information but hadn’t been refunded were merely part of a ‘genuine oversight’ and Leckie apologised for any inconvenienced caused, but it certainly demonstrates the downsides of property raffles.
Ticket Sales Disappoint
An example of the Advertising Standard Authority getting involved can be found in the case of Susan DeVere, who set up a contest to raffle off Orchardton Castle, near Auchencairn, Kirkcudbrightshire. She sold tickets for £5 each via Facebook and her own website, but ticket sales for the 19th century, 17-bedroom property were disappointing. As a result, the rules of the competition stated that a cash prize would be issued instead. In the end, three cash prizes of £65,000, £7,000 and £5,000 were given out, as well as the opportunity for the business to take a share of the property.
One contestant wasn’t happy with the result, however, and reported the raffle to the Advertising Standards Authority. They looked into the matter and decided that the cash prize was not a ‘reasonable equivalent’. The ASA said,
“Because neither the advertised prize nor a reasonable alternative had been awarded, we concluded that the promotion had not been administered fairly and was in breach of the code.”
This was something that DeVere strongly objected to, believing that she had run the competition in an entirely ‘transparent’ way.
DeVere pointed to the fact that the terms and conditions as well as the website both drew attention to the fact that a cash prize would be offered in the event that not enough tickets were sold, up to and including the fact that example cash prizes were suggested. She said that she hadn’t made any money from the raffle, with £107,000 being raised in ticket sales. Of those, £77,000 were given out in prizes and £19,000 was given to charity. What was left went on the expense of advertising, website costs and the prize of the legal firm that DeVere had hired to ensure that the entire competition was above board.
