Common practice in US

House raffles are common in the US, with charities often joining forces with property developers to raffle new homes. In the UK they remain rare, according to a report in the Telegraph in October 2005. But with figures from the UK Nationwide Building Society showing that house prices fell for the second consecutive month in September - the first time in five years that prices have fallen for two months running - more sellers may be considering similar action in future, the report said.

The newspaper featured a certain Daniel Bloy, who had up till October 2005, put his Nottingham flat up for sale for five months. He received only one realistic offer, and even that fell through. Refusing to slash his price any further, he offered his two-bedroom flat as the first prize in an online spot-the-ball competition, giving one lucky winner the opportunity to own a home, mortgage-free, for just ?25, or S$56. (A spot-the-ball competition is a game where the player has to guess the position of a ball which has been removed from a photograph of a ball sport.)

The Telegraph quoted Mr Bloy as saying that the competition had been fully approved and was run by solicitors. Photographs are available online and entrants who got in touch with his solicitors could view the lease details and title deeds. He added that he had spent several weeks researching both the gaming laws in the UK and the possible tax implications of such a scheme before seeking legal advice.

Under Mr Bloy's rules for his spot-the-ball competition, a minimum of 6,000 tickets had to be sold for the flat sale to go ahead; the maximum was 8,000 tickets. If fewer than 6,000 tickets were sold, the winner of the spot-the-ball competitions would walk away with 65 per cent of the value of the ticket sales.

Apart from the first prize, there were also 11 smaller cash prizes.

At ?25 a ticket, if the maximum number was sold, ?200,000 would be raked in. If just 6,000 were sold, the flat would effectively be sold for ?150,000. His earlier asking price for the apartment was ?130,000. Even if far fewer tickets were sold, Mr Bloy would keep 35 per cent of the proceeds, which would be sufficient to cover the additional legal fees and costs of promoting the scheme.

The legal costs, said Mr Bloy, were obviously significantly higher than what one would pay for a normal house sale. He had to pay all the usual conveyancing costs and associated legal fees, and estimated that he spent more than ?2,000 drafting the competition rules.

Mr Bloy's competition was based on the popular 'spot the ball' format. Other house 'raffles' in the past have required ticket buyers to answer a number of simple trivia questions.

Under competition law in the UK, if a name is simply drawn from a hat, the arrangement is classified as a lottery, and the organisers need to apply for a special permit to run it. The winner, however, would have to pay stamp duty plus his own legal fees. Mr Bloy's competition was to have opened on Sept 26, 2005 and close on Dec 16, 2005. No subsequent reports were found. I wonder if he managed to sell his flat.

In Asian markets, if things do deteriorate to an extent where almost all transactions seized up, then perhaps property raffles could be an interesting option to get the money flowing again. To make it easier, perhaps a company with a special licence from the regulator could be set up to conduct such raffles. Checks would have to be done to ensure that the 'owner' is the rightful one, and that the property will come unencumbered.

As they say, desperate times call for desperate measures. So, even if this scheme is not implementable, it's at least an interesting one to mull over.

This article was first published in The Business Times on December 13, 2008.