Social Housing “Loan Note” Scheme Left Investors Millions Out of Pocket

July 31, 2026

As a developer of specialist care property investments, we believe we have a duty to warn investors about investment structures that could end badly, potentially leading to the loss of hundreds of thousands of pounds.

Here at Foot Forward Property Investments, it is incredibly important to us that investors understand the risks associated with loan note investments, unsecured corporate lending and arrangements where capital is paid into a company without the investor acquiring a directly owned property asset.

We have seen too many firms capitalise on the appeal of “guaranteed rent”, “government-backed housing” and “socially responsible investment”. These phrases may sound reassuring. However, they do not automatically provide security, asset ownership or protection if the company receiving the money becomes insolvent.

A recent City AM investigation provides a deeply concerning example. Alderley Group, a business that invested in affordable housing projects across the North West of England, reportedly entered administration owing its investors approximately £27 million. Around 1,000 investors were said to have been affected after the company had previously promoted annual returns of up to 17%.

For investors considering any form of fixed-income property investment, this case provides an important lesson. The headline return should never be examined separately from the legal structure, security arrangements and ownership of the underlying asset.

What happened to investors in the Alderley Group scheme?

According to City AM, Alderley Group raised money by issuing unregulated corporate loan notes rather than relying solely on conventional bank finance.

Under this structure, investors were effectively lending money to the company for a fixed period. In return, they were promised interest payments, with their original capital expected to be repaid when the loan note matured.

The crucial distinction is that purchasing a corporate loan note is not the same as purchasing a property.

A loan note investor may hold a contractual promise of repayment. However, they do not necessarily own the land, building or housing asset associated with the investment. Their position when something goes wrong depends on the terms of the agreement, the security granted and where they rank among the company’s creditors.

City AM reported that Alderley stopped making interest payments in January 2026, faced a winding-up petition in May and entered administration in early June. The publication also reported that Homes England did not have a formal partnership with the company, despite claims made in marketing materials referring to the government housing agency.

The consequences for individual investors appear to have been devastating.

One couple reportedly purchased two loan notes, investing £70,000 in September 2024 and a further £201,000 in October 2024. They had been promised annual returns of 15% and 17% respectively. When repayment became due, the company reportedly relied on a contractual provision that extended the repayment period by another six months. The couple later offered to waive the interest and accept only the return of their original capital, but the money was not repaid before administrators were appointed.

These were not necessarily people who viewed themselves as speculative gamblers. Some were retirees or ordinary private investors trying to protect the money they had accumulated over decades.

One investor reportedly lost £550,000

The scale of the reported losses extends beyond smaller individual investments.

A senior partner at Richardson Hartley Law, which is representing investors, told City AM that one client had lost £550,000 through the scheme. The law firm also said it was handling millions of pounds in claims and had seen several social housing investment projects fail during the previous year, resulting in collective investor losses running into tens of millions of pounds.

The law firm’s warning was particularly direct. It stated that some loan note investment schemes offer little or no security and that thousands of people have lost their life savings.

This should cause every prospective investor to pause.

A promised return of 15%, 17% or even 25% may attract attention. Yet the return is only meaningful when the investment capital remains protected and the organisation responsible for repayment remains solvent.

A high interest rate may sometimes reflect a high level of risk rather than an unusually strong opportunity.

Why loan notes are not the same as owning property

Loan notes are frequently marketed alongside images of houses, apartment blocks, developments and tenants. That presentation can create the impression that the investor is buying into property.

However, the legal reality may be entirely different.

With a corporate loan note, the investor normally lends money to a company. The company may use that money to purchase property, fund construction, pay marketing costs, cover operational expenses, refinance earlier obligations or support other parts of the business.

The investor may not own any identifiable property.

They may not be registered at HM Land Registry.

They may not control the asset.

They may not receive the rental income directly.

They may also have limited influence over how the company deploys their capital.

Even where a loan note is described as “secured”, investors should establish precisely what that security consists of. A general reference to property, land or future developments does not necessarily mean that the investor holds a first legal charge over a completed asset with sufficient equity to repay them.

Important questions include:

• Is the investment genuinely secured?
• Which legal entity owns the underlying property?
• Does the investor hold a first charge, second charge or no registered charge?
• Are other lenders ranked ahead of the investor?
• Has the asset already been used as security elsewhere?
• Is the security independently valued?
• Would the asset value cover all creditors if the company failed?
• Does the investor own the property, or merely hold a promise from the company?
• Is the investment regulated by the Financial Conduct Authority?
• Could Financial Services Compensation Scheme protection apply?
• Where is the investor’s money actually being spent?

Investors should obtain independent legal and financial advice before committing capital. They should not rely solely on information supplied by the company selling the investment or by an introducer receiving a commission.

Which? had already warned about social housing investment claims

The concerns raised by City AM were not entirely new.

In October 2024, Which? published an investigation into companies promoting high-return social housing and temporary accommodation investments through Facebook advertising.

Posing as a prospective investor, Which? contacted businesses promoting these schemes and was offered returns of up to 25% per year. Which? contrasted these figures with a reported average gross rental yield of 5.6% at the time, noting that a 25% return appeared particularly ambitious once promoter fees were considered.

The investigation uncovered several examples of sales claims that Which? regarded as misleading or incorrect.

In one case, a sales representative claimed that high returns were supported by the Government’s £11.5 billion Affordable Housing Programme. Which? clarified that the programme funded capital expenditure for housebuilding rather than subsidising rental payments. The company director later acknowledged that the sales representative’s explanation was wrong.

Which? also reported that a property offered to its journalist as a social housing lettings investment was simultaneously being marketed on a holiday-letting website at £174 per night.

These findings demonstrate why investors should independently verify every substantial claim made during an investment sales process.

Only 60% of some investor funds was reportedly available to generate returns

One of the most concerning details in the Which? investigation related to how investor capital could be allocated.

Which? reported that Alderley Group’s documentation stated that up to 20% of investor funds could be paid to marketing firms, while a further 20% could be used for running costs. That would leave approximately 60% of the investor’s money available to generate the returns being promised.

This raises a straightforward commercial question.

When a substantial portion of an investor’s capital is removed from productive use at the beginning of the arrangement, how will the remaining money generate enough profit to pay a double-digit annual return and repay the full original capital?

Investors should always request a clear breakdown showing:

• How much of their capital will be used to acquire or improve assets
• How much will be paid in commissions
• How much will be retained for administration and overheads
• Whether interest is being paid from genuine operating income
• Whether new investment capital is required to meet earlier obligations
• How the original capital will be repaid at maturity
• What happens when sales, refinancing or development activity is delayed

An investment should have a comprehensible economic model. The promised payments should come from identifiable and sustainable income rather than assumptions, future fundraising or continuous refinancing.

Small print can tell a different story from the headline marketing

Promotional materials may repeatedly use words such as “secure”, “guaranteed”, “ethical” and “government-backed”.

The legal documents may contain a very different message.

Which? reported that Alderley advertised annual loan note returns of up to 17% and referred to “robust investor security”. However, its small print warned that investing in unlisted corporate loan notes involved a significant risk of default and capital loss.

This distinction matters.

Marketing language is designed to attract interest. The contract determines the investor’s legal position.

Before investing, every investor should read the complete agreement, including:

• Default provisions
• Repayment extension clauses
• Security documents
• Charges registered against assets
• Ranking of creditors
• Company guarantees
• Early redemption terms
• Events of default
• Limitations of liability
• Use-of-funds provisions
• Circumstances allowing repayment to be delayed

Independent legal advice should be obtained from a solicitor who acts solely for the investor. A solicitor recommended or paid by the investment promoter may not provide the same level of independence.

“Government-backed” should never be accepted without evidence

A recurring theme within questionable social housing marketing is the suggestion that the investment, rent or tenant is directly backed by the Government.

In practice, several separate organisations may be involved:

1. The investor provides capital to an investment company.
2. The investment company acquires or leases a property.
3. Another business manages the accommodation.
4. A provider places occupants into the property.
5. A council, housing association or public body may pay certain accommodation costs.
6. The investor receives payments from the company with which they signed the agreement.

A local authority’s involvement somewhere within that chain does not necessarily mean that the authority has guaranteed the investor’s capital or rental return.

The investor must establish exactly who their contractual counterparty is.

They should also establish:

• Who has signed the lease?
• Is the council actually named as the tenant?
• Is the tenant a private limited company?
• Is the rent dependent on another provider receiving public funding?
• Has the Government guaranteed the loan note?
• Has the relevant public body confirmed the claimed relationship?
• What happens if the provider’s contract is terminated?
• What happens if occupancy or funding arrangements change?

If a salesperson says that an investment is government-backed, the investor should request documentary evidence from the relevant government body. General references to councils, housing need or public funding do not constitute a financial guarantee.

FCA regulation and investor protection

Which? reported that Alderley Group 2019, Citygate Housing and Unique Property Group were not regulated by the Financial Conduct Authority.

Its investigation also highlighted a warning concerning another unauthorised firm. The FCA reportedly stated that investors would be unlikely to recover their money if that firm went out of business.

Not every property transaction or corporate borrowing arrangement falls within FCA regulation. However, investors need to understand the consequences when an investment is unregulated.

Depending on the arrangement, they may not have access to:

• The Financial Ombudsman Service
• Financial Services Compensation Scheme protection
• Regulatory suitability requirements
• The same disclosure standards applied to regulated investments
• Restrictions on how high-risk investments are promoted to retail investors

Checking the FCA Financial Services Register is an important step, but it should not be the only step.

The investor should confirm that the specific company is authorised for the specific activity being promoted. Fraudsters and unauthorised introducers may refer to legitimate companies, use similar names or imply a regulatory status that does not apply to the investment being offered.

Why Foot Forward does not offer social housing investments

Foot Forward Property Investments operates solely within specialist children’s care, adult residential care and SEN provision.

We do not develop or promote general social housing investments.

From our perspective, there have been too many examples of housing providers becoming insolvent, lease obligations not being fulfilled and investors discovering that the security they expected was not present.

We have also witnessed considerable local resistance to some social housing proposals. Neighbour concerns can arise around property concentration, management standards, planning, occupancy types and the effect that poorly considered schemes may have on surrounding communities.

This does not mean that every social housing provider or every social housing investment is inherently unsafe.

Social housing serves a vital purpose, while many responsible housing associations, charities, councils and regulated providers deliver essential accommodation across the United Kingdom.

The concern relates to investment firms using social need as a marketing narrative while offering unsustainable returns, weak investor security or unclear contractual structures.

The social value of the accommodation should never be used to distract investors from examining the financial risk.

Why we focus on specialist care and SEN provision

Our work is concentrated within areas where the property is designed around a defined operational requirement.

These include:

• Regulated children’s care homes
• Adult residential care properties
• Homes supporting adults with complex needs
• SEN and SEND education properties
• Specialist accommodation connected to regulated care provision

These are not generic residential properties with a new marketing label attached.

Each property must be assessed, acquired, designed and refurbished around the requirements of the intended care or education provider. Depending on its use, the building may require specialist layouts, planning permission, fire safety measures, accessibility improvements, enhanced communal areas, staff facilities, therapy rooms, sensory spaces, secure gardens or other operational adaptations.

Our role as the developer involves handling the property process from acquisition through to development and delivery.

This specialist focus also allows us to understand the intended use of the building, the requirements of the operator and the practical work required before the property can become operational.

Our investors own their property freehold

Every Foot Forward care property investment is asset-backed.

The investor purchases and owns the property 100% freehold. Their ownership is registered through the normal legal conveyancing process.

The investor is not buying shares in Foot Forward.

The investor is not placing their capital into an unsecured corporate loan note.

The investor is not purchasing a fraction of a room.

The investor is not relying solely on our promise to return their original money at a future maturity date.

They own an identifiable property asset.

This does not remove every form of investment risk. Property values can change, operators can face commercial challenges, regulatory requirements can evolve and no investment should be described as entirely risk-free.

However, direct freehold ownership creates a fundamentally different legal position from lending money to a company without ownership of the underlying property.

Asset-backed does not simply mean that property exists somewhere

The term “asset-backed” is sometimes used loosely.

A company may describe an investment as asset-backed because it owns properties within its wider group. That does not necessarily mean that the individual investor owns those properties or holds enforceable security over them.

For an investor, the relevant questions include:

• Is the property registered in my name or in my purchasing company’s name?
• Will my solicitor verify ownership?
• Will I receive the title documents?
• Is the property being transferred through a conventional purchase?
• Are there undisclosed charges against the title?
• Am I the landlord under the lease?
• Will rental payments relate to my property?
• Can the investment company use my property as security for its own borrowing?

With our care property developments, the investor owns the freehold asset and acts as the landlord under the lease.

That provides clarity around who owns the building, who occupies it and how the rental relationship is structured.

The difference between a tenant and an investment company

A property investor should understand the distinction between the developer, freehold owner and occupational tenant.

In our structure:

• Foot Forward manages the acquisition and development process.
• The investor purchases and owns the freehold property.
• A specialist care or education provider occupies the completed property under a lease.
• The investor receives rent as the landlord.
• The underlying property remains owned by the investor.

This differs from a loan note structure where:

• The investor lends money to a company.
• The company controls how that money is used.
• The company may own any resulting property.
• The investor receives interest rather than property rent.
• The investor relies on the company to repay the capital at maturity.
• The investor may become an unsecured or subordinated creditor if the company fails.

Both arrangements may be promoted using property imagery. Their legal and financial structures are not the same.

Guaranteed rent should never end the due-diligence process

The phrase “guaranteed rent” is used extensively across social housing, supported accommodation, holiday letting, rent-to-rent and property investment marketing.

The first question should be: guaranteed by whom?

A rent obligation is only as strong as the party responsible for paying it, together with any legally enforceable security supporting that obligation.

Investors should review:

• The tenant’s filed accounts
• The tenant’s operating history
• Its regulatory position
• Its funding arrangements
• Its existing lease liabilities
• The lease length
• Break clauses
• Repairing obligations
• Rent review provisions
• Guarantees or rent deposits
• What happens if the property cannot be used for its intended purpose
• Whether the tenant depends on a single public-sector contract

A long lease can offer valuable income visibility. Nevertheless, the length printed on the front of a lease does not replace financial and operational due diligence on the tenant.

Warning signs investors should recognise

The City AM and Which? investigations highlight several warning signs that may justify further investigation.

Exceptionally high fixed returns

Returns of 15%, 17%, 20% or 25% per year require a credible explanation. Investors should identify the economic activity capable of supporting those payments after finance costs, overheads, development costs, commissions and tax.

Heavy use of the word “guaranteed”

No investment return becomes secure merely because the word “guaranteed” appears repeatedly in a brochure.

References to Government without contractual evidence

Claims involving Homes England, councils, the NHS or other public bodies should be verified directly.

Loan note structures presented as property ownership

An investor should never assume that lending to a property company gives them ownership of the company’s properties.

Large introducer or marketing fees

High commissions reduce the amount of capital available to acquire assets or produce income.

Pressure to invest quickly

Artificial deadlines, claims of limited availability and repeated telephone pressure can prevent investors from completing proper checks.

Repayment dependent on refinancing or future sales

An investor should understand whether their capital can only be returned when a property is sold, refinanced or funded by another investor.

Reliance on glossy marketing rather than documents

Computer-generated images, professional brochures and social media testimonials are not substitutes for title documents, filed accounts, leases, valuations and legal security.

Unclear answers about where the money goes

A reputable promoter should be able to explain the complete movement of investor capital.

A practical due-diligence checklist

Before investing in any property-related arrangement, consider asking the following questions.

Ownership

• What exactly will I own?
• Will my name or company appear on the Land Registry title?
• Do I own the entire property?
• Is the property already subject to borrowing?

Investment structure

• Am I buying property or lending money?
• Am I purchasing shares, a loan note or a fractional interest?
• Is my capital secured?
• Where would I rank if the company entered administration?

Regulation

• Is the promoter regulated by the FCA?
• Is the specific investment a regulated product?
• Will FSCS or Financial Ombudsman protection apply?
• Is the person recommending it authorised to provide financial advice?

Use of funds

• How much of my money goes into the property?
• How much is paid in commission?
• How much funds operating expenses?
• Can I see a detailed development budget?

Income

• Who is responsible for paying me?
• What activity generates the income?
• Is the payer financially strong enough to meet the obligation?
• Is the return paid from rental income, operating profits or newly raised capital?

Property

• Has the property been independently surveyed?
• Is the valuation based on its present condition or a future assumption?
• Does it have the required planning consent?
• Is the proposed use legally and operationally viable?

Exit

• How will my original capital be recovered?
• Is the exit dependent on selling to another investor?
• Is there an established resale market?
• Can repayment be delayed under the contract?
• What happens if refinancing is unavailable?

Education matters, even when we never do business together

Even if Foot Forward and the reader never do business together, we hope this article helps them understand the difference between a sustainable, asset-backed property investment and a weak arrangement that could leave them exposed.

The alternative investment market can sometimes resemble a shark pit.

Some firms appear to be more concerned with collecting investor capital than protecting the people providing it. Glossy brochures, confident salespeople and claims of guaranteed returns may continue for months or years. When the company fails, the investor may discover that the promised security was limited, subordinated or never connected to an asset they actually owned.

The consequences are not limited to numbers on a spreadsheet.

People may lose retirement savings, family money, pension withdrawals, inheritances or capital accumulated over an entire career.

That is why investor education matters.

Property investment should be understandable

A credible investment should be capable of being explained clearly.

The investor should understand:

• What they own
• Who holds their money
• What the money pays for
• Who pays the income
• Why that income is commercially sustainable
• What legal protection exists
• What could go wrong
• How the investment may be exited

Complex legal structures should not be used to obscure weak security.

Property ownership, tenant obligations, development costs and income arrangements should be documented and independently reviewed.

Learn about asset-backed specialist care property investments

Foot Forward Property Investments develops fully managed properties within the children’s care, adult residential care and SEN provision sectors.

Our investors own their properties 100% freehold from the point of acquisition. We manage the development process, while the completed property is leased to a specialist care or education provider for its intended operational use.

These investments remain subject to property, tenant, regulatory and commercial risks. Prospective investors should always obtain independent legal, tax and financial advice before proceeding.

To learn more about our development model and currently available opportunities, visit:

Explore our fully managed care homes for sale

Frequently asked questions

What is a property loan note?

A property loan note is normally a form of corporate borrowing. The investor lends money to a company, which agrees to pay interest and return the capital at a future date. The investor does not automatically own any property purchased or developed by the company.

Are loan notes protected by the FCA?

Some loan notes and promotions may fall within regulated activities, while others are unregulated. Investors should check the FCA Financial Services Register, establish whether the specific investment is regulated and obtain independent advice. Being connected to property does not automatically provide FCA or FSCS protection.

Does “asset-backed” mean I own the property?

Not necessarily. A company may use the term because its wider business owns property. Investors should confirm whether they personally acquire the freehold, hold a registered legal charge or have no direct claim over a specific asset.

Is social housing rent guaranteed by the Government?

Not automatically. A council or public body may fund accommodation somewhere within the operating chain without guaranteeing the investor’s rent or capital. Investors should identify the actual tenant and contractual payer.

Why can high investment returns be a warning sign?

A high return may indicate higher commercial, liquidity, default or security risk. Investors should establish how the return is generated and whether the underlying activity can support it after all costs and commissions.

What happens when a loan note company enters administration?

Investors usually become creditors of the company. The amount recovered depends on available assets, the validity and ranking of security, prior-ranking creditors and administration costs. Some investors may recover only part of their capital or nothing at all.

How is direct freehold ownership different?

With direct freehold ownership, the investor owns a specific property registered at HM Land Registry. Under a loan note, the investor generally holds a debt claim against a company rather than ownership of the company’s underlying properties.

What should an investor verify before proceeding?

Investors should verify property ownership, legal security, planning, valuation, use of funds, tenant strength, regulatory status, fees, repayment terms and the proposed exit. Independent legal, financial and tax advice should be taken before capital is committed.

This article is provided for general educational purposes and does not constitute financial, legal or tax advice. Property values and rental income can rise or fall. Investors should undertake their own due diligence and obtain advice from appropriately qualified independent professionals.

This blog post was written by Thomas Abram – Group Marketing Executive