Glossy pictures of sleek residential developments and the promise of guaranteed rental income lured hundreds of investors into schemes in the North West that have failed to materialise. But while some are taking legal action against the Lancashire-based company that sold them the properties, the fate of investors hoping to recoup deposits paid to a subsidiary that went into administration recently may depend on whether they paid before or after a single date in 2007.

Dylan Harvey Residential Ltd (DHR), which is part of the Dylan Harvey Group, went into administration two weeks ago with debts of £100 million. About 500 investors paid deposits of up to £20,000 for off-plan apartments, which have not been built. Pannone, the law firm leading a group action against the Dylan Harvey Group on behalf of 70 investors who were asked to swap properties when their original choices were mothballed, says that those who signed a contract with DHR before October 24, 2007, may still be able to pursue their claims against Dylan Harvey Group.

On that date a company then called Dylan Harvey Residential changed its name to Dylan Harvey Investments. Also on that date, the company known as Dylan Harvey Developments changed its name to Dylan Harvey Residential. Seán Hackett, a solicitor leading the case at Pannone, said: “Effectively it is this latter company which has gone into administration. Therefore, anyone who paid monies to Dylan Harvey Residential Ltd before October 24, 2007, may have a claim to recoup their money.”

Those who invested in DHR after that date, or in Dylan Harvey Developments before that date, will have to rely on the decisions of the administrators, CLB Coopers. Investors in DHR are owed a total of £6.5 million. A meeting with the creditors will take place within ten weeks. A spokesman for the Dylan Harvey Group said that the 2007 name changes were because of “restructuring due to expansion” of the whole group at the time. The Dylan Harvey Group doubled its staff numbers to 34 that year.

The investors’ case against the group has been building for more than a year, as angry depositors tried and failed to get their money back on the projects that had still not been started. Many who asked for a full refund were invited to transfer their deposits to another project. An online petition calling on DHR to refund deposits was set up by investors in November. It is believed that two more law firms are considering group actions.

Darren Jones, 39, is one of these disgruntled investors. He paid a £6,000 deposit on a £110,000 studio apartment in the Clippers Quay development in Salford Quays in mid-2007 and says he was told his deposit would go to the developer. However, Ask Developments, which says the development is on hold indefinitely after Ask and DHR failed to secure adequate finance last autumn, says it has never received any money from DHR and was aware that the company was taking reservation fees but not deposits.

Jones was attracted to Salford Quay’s Media City, the first phase of which is due to be completed in 2011. He said: “I’m not a property investor by trade, I’m a media engineer, and I just wanted to invest here because of the media interest. I don’t want a property elsewhere.”

Some investors, including Lydia Smith (see case study, above right), were invited to move to Mann Island, a waterfront development in Liverpool, where Steven Gerrard, the Liverpool captain, bought three penthouse apartments for £5 million last year. Gerrard is said to be close friends with Toby Whittaker, a director of the Dylan Harvey Group. The administrators have said the project is totally separate from DHR and investors will not be affected. However, a local property journalist said that “mistrust in the company is such that investors simply want their money back”. Building on Mann Island has begun and the first phase is due for completion early next year.

Whittaker first went into property development in 1996, when he was only 19. A source close to him said that he used to sell prestige cars until his father told him that “selling cars might make £1 million, but property would net £10 million to £20 million easily”.

John Turner, the finance director of the Dylan Harvey Group, said he could not comment on “where the money for Clippers Quay had gone” as accounts were in the hands of the administrators. However, he said that some deposits for other developments represented by DHR had been handed over to contractors that had since gone into liquidation.

Mark Getliffe, of the administrator CLB Coopers, said the business appeared to have failed because of the domino effect of the residential property market grinding to a halt. He added: “It was also affected by one of its contractual partners, Fresh Developments, going into liquidation this April owing DHR £1.7 million. In some ways not having to contractually complete on properties valued at the peak of the market and for which mortgages may now no longer be available may have limited the potential losses to the clients.”

A Manchester property PR said: “It’s a classic example of how certain parts of the residential industry – mainly the developers, goaded on by greedy agents who were abetted by unscrupulous financial advisers, who duped gullible mortgage lenders and would-be investors into buying off-plan at exorbitant prices that anyone with half a brain could see were over-valued, unrealistic and unsustainable — screwed the system and made personal fortunes very quickly.”

Taking action

Lydia Smith, 33, paid a £6,000 deposit in April 2007 for a one-bedroom off-plan apartment in Clippers Quay, Greater Manchester. She signed the cheque to Dylan Harvey Development Ltd, the company that changed its name to Dylan Harvey Residential the following October.

However, in early 2008 Smith received a letter saying that the building work had been postponed, inviting her to move her investment to another property. Over the next few months she received several letters, asking her to switch her investment to properties that included an hotel and an office block, all of which she declined. Then, last September, a letter arrived that said the company was looking to exchange contracts “in the near future, to comply with our development finance arrangements”. It also said that a reduction of £500 had been negotiated on her behalf. “I went online and found out about the legal action. I refuse to lose my money because it was mismanaged.”

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