Avoiding negative equity or a slow-moving residential property market is proving to be a challenge for many homeowners wishing to sell. One creative solution appears to be the use of competitions, lotteries or raffles, where the prize is the house. In fact, there are reports of some going further, putting up cars, yachts, planes or helicopters as well as houses.
Sadly, in many cases these are all illegal. Under the Gambling Act 2005 only licensed operators can conduct lotteries. Prize competitions are lawful as these are not subject to the Gambling Act 2005 or the regulation of the Gambling Commission. However, to be a prize competition outside of the scope of the Act it must not be a competition where the winner is chosen by a method relying wholly on chance. In the words of the Gambling Act 2005:
“A process which requires persons to exercise skill or judgment or to display knowledge shall be treated for the purposes of this section as relying wholly on chance if— (a) the requirement cannot reasonably be expected to prevent a significant proportion of persons who participate in the arrangement of which the process forms part from receiving a prize, and (b) the requirement cannot reasonably be expected to prevent a significant proportion of persons who wish to participate in that arrangement from doing so. (section 14(5))
If a competition does not pass this skill, judgement or knowledge test, it is a lottery. The Gambling Commission has published guidance in Prize competitions free draw: the requirements of the Gambling Act 2005. However, this is not very helpful, as there is little case law to determine where the courts draw the line in deciding whether a competition requires an appropriate level of skill and judgement. This has led to a proliferation of “spot the ball” type competitions and other fairly lame ruses to introduce a skill and judgement test.
The Gambling Commission reports in its advice note Prize competitions and free draw: house competitions (May 2009) that the majority of organisers of house competitions it has contacted “have had significant difficulty in satisfying themselves that their house competition is legal.” If you really want to put your house up for a prize, get some proper legal advice.