A holiday property investment company has had its knuckles rapped over a misleading advert in The Times that promised investors whopping returns.

Luxury Lodge Estates Company Ltd’s (Luxury Lodges) magazine advert in the paper’s Saturday magazine headlined ‘Luxury residences available across 5-star resorts in the UK, Invest from £295,000’ and boasted ‘Up to £83,454 over two years guaranteed return based on historical success - benefit from our sublet plan with guaranteed returns’.

It was challenged by the ASA which queried whether this failed to illustrate the risks of the investment. The firm argued that because the advertised return was guaranteed, a risk warning wasn’t required.

The advertising watchdog says it was not sufficiently clear that the quoted return linked to the guarantee related to rental income from the optional sublet scheme.

The guaranteed sublet programme was valid for a minimum of 12 months and a maximum of 24 months, whereas the advert wasn’t clear that the guarantee did not necessarily apply across the full two years.

Shortfall

“We understood that Luxury Lodges guaranteed a minimum occupancy level of 80% and would make up any shortfall in income if occupancy did not reach that level after 12 months,” the ASA ruled. “However, none of those details of how the guarantee worked were made clear in the ad.”

It added: “We told Luxury Lodge Estates Company to ensure that future ads made sufficiently clear that the value of investments was variable and could go down as well as up and that past performance did not necessarily give a guide for the future.

“We also told them to make the nature of the guarantee clear. Finally, we told them to ensure that future ads included non-optional fees and charges that applied to all or most buyers and to make clear that other fees might also apply.”

Read the ruling.

Image: Luxury Lodge Estates Company/ASA