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What is a buyer-funded or fractional property scheme?
In a typical property purchase, the buyer pays a deposit of around 10% on exchange of contracts and the balance on completion. The Solicitors Regulation Authority (SRA), the regulator of solicitors and law firms in England and Wales, has warned that in some investment schemes the so-called deposit has been 30% or even as high as 80% of the price.
Where that money is released early to the developer, buyers are in effect financing the development themselves. If the developer fails, they may have very little protection.
Schemes selling individual student studios, hotel rooms or care home rooms are often called fractional property investments. The SRA has said buyers may be wrongly reassured that taking a lease gives them a secure interest in property, when their return really depends on the business being well run.
Companies House records show that Galgate Developments Ltd entered creditors’ voluntary liquidation on 13 April 2023 and was dissolved on 31 October 2025. The company was incorporated in May 2019, and its last filed accounts were made up to 31 May 2021.
Silk Mill is a converted Victorian-era mill close to Lancaster University. Town Square Group, which lists the development in its portfolio, describes it as 119 furnished studio apartments aimed at the student market and says the studios were completed in 2021.
Investors’ experiences may differ. Some may have paid large sums towards units that were never completed or transferred to them. Others may own a completed studio but have seen rental income stop, management arrangements fail or the value of their unit fall.
Once a company has been dissolved, it is generally very difficult to recover money from it directly. For many investors, the more important question is whether a professional involved in the purchase, particularly their own conveyancing solicitor, should have done more to protect them.
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What should a conveyancing solicitor have done?
The SRA’s warning notice on investment schemes including conveyancing, first published in June 2017 and updated on 17 August 2020, sets out what it expects of solicitors acting for buyers in these transactions.
According to the SRA, a solicitor acting for a buyer should:
- explain fully how the transaction differs from buying an existing property
- explain that there is a substantial risk the developer could fail and money could be lost
- point out clear risks that may not be obvious to the client
- advise against the transaction where appropriate
- carry out their own checks rather than rely on the seller or promoters
The SRA has also said that standard warnings about the risk of losing capital are not enough on their own, and that “promises of substantial returns can be misleading”. It has raised concerns about “limited retainers”, where a firm says it was only instructed on part of a transaction.
The warning notice sets out regulatory expectations rather than the legal test a court applies in a negligence claim. However, it may help to show what a reasonably competent solicitor should have recognised and explained. TLW Solicitors has previously reported on whether a conveyancing solicitor could be liable for losses in an unregulated investment scheme.
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What warning signs might a solicitor have spotted?
Red flags highlighted by the SRA include:
- high deposits paid in instalments before exchange
- returns that are high compared with other investments
- complex or unfair contract terms
- little legal work beyond passing funds on
- law firms recommended through a seller’s panel or referral arrangement
- high commissions paid to sellers out of buyers’ deposits
If your solicitor was recommended by the developer or a sales agent, it may be worth checking whether they were truly independent and what their retainer covered.
Not every failed investment means a solicitor was negligent. Each case depends on what the solicitor was asked to do, what advice was given and whether the loss was caused by any failing.
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Was Silk Mill an unregulated collective investment scheme?
A collective investment scheme is defined in section 235 of the Financial Services and Markets Act 2000. In broad terms, investors share in profits or income from property, do not have day-to-day control over its management, and either their money is pooled or the property is managed as a whole by the operator.
An unregulated collective investment scheme (UCIS) is one that is not authorised or recognised by the Financial Conduct Authority (FCA), the UK’s financial services regulator. There are legal restrictions on how these schemes can be promoted.
The SRA has said that many buyer-led schemes are likely to be collective investment schemes. Whether Silk Mill was one would depend on the details of its arrangements, such as whether rental income was pooled or the building was let and managed as a single operation. That is not clear from the information currently available.
If it was, questions may arise about how the scheme was promoted and whether regulated firms should have been involved. TLW Solicitors has previously explained what a UCIS is and how the FCA has stepped up action on these schemes.
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What should Silk Mill investors do now?
The first step is to gather the paperwork from the purchase and from any rental arrangements.
Useful documents to include:
- the reservation form, contract and lease for your unit
- your solicitor’s report on title and client care letter
- emails and letters with your solicitor, the developer and any sales agent
- brochures, adverts and projected returns
- rental statements and management agreements
- correspondence from the liquidators
If you no longer have these, don’t worry we will apply to your former solicitor for their full file.
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Are there time limits for a claim?
Yes. A negligence claim must generally be brought within six years of when the loss was suffered, under section 2 of the Limitation Act 1980.
Where the loss only came to light later, section 14A may allow three years from when the investor knew, or should have known, the relevant facts. Section 14B sets an overall limit of 15 years from the negligent act or omission.
Galgate’s liquidation began in April 2023, and many purchases will date from before then. Investors should not delay, as some time limits may already be close.
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TLW Solicitors’ comment
“The Galgate liquidation shows how property investments presented as straightforward purchases can leave investors exposed when the developer fails. Now that the company has been dissolved, investors are unlikely to recover much from the developer itself.
In schemes like this, a key question is what the investor’s own solicitor told them before they committed their money. The SRA has been clear that solicitors acting for buyers should explain the risk of the developer failing, not simply process the paperwork as if the matter involves a straightforward property conveyance.
Investors should gather their contract, their solicitor’s report and any correspondence, and act promptly because time limits apply. If you invested in Silk Mill or a similar scheme, please get in touch with my team to discuss your next steps.”
How TLW Solicitors can help
TLW Solicitors helps investors who have lost money in failed or unsuitable pension and investment schemes, including property-based investments and cases where advisers, pension providers or other professionals may have been involved.
If you or a loved one invested in the Galgate Silk Mill scheme, or a similar student accommodation or fractional property investment, we can help you understand whether a claim against a conveyancing solicitor is possible.
This article is for general information only and is not legal advice.
The law may have changed since publication.
Please contact us for advice on your circumstances.
