Solicitors across the country have received a formal warning about the dangers of getting involved in prize draws to shift unsold houses and flats during the economic downturn.

The intervention by the president of the Law Society reflects growing concerns about the legality of online competitions that offer the chance to acquire a dream home for as little as £25.

Paul Marsh, who is also a specialist property lawyer, is concerned that desperate homeowners and their legal advisers could end up in prison or face a hefty fine for setting up unlawful lotteries.

Anyone found guilty of running an unlawful lottery faces a maximum sentence of 51 weeks in prison and/or a fine of up to £5,000 under the Gambling Act 2005.

Mr Marsh decided to speak out yesterday because he fears that, as the recession deepens and house prices continue to fall, more people may be tempted to establish prize draws. He also fears that they could be used to conduct mortgage fraud or for money laundering.

The Times first raised questions about the legality of such lotteries in September. Lawyers and politicians have expressed concern that, without the strict regulation of these competitions, unscrupulous people may be encouraged to invent bogus prizes as a money-making scam.

Mr Marsh is concerned that many of the competitions do not meet the strict conditions laid down by the Gambling Commission. It is illegal to operate a private lottery for profit or personal gain, but it is legal to run a prize competition that involves an exercise or skill.

Concerns have been raised, however, whether the questions used to allow people to enter a number of online prize draws meet the required skills test. The questions are meant to require a degree of knowledge or skill that will deter a significant number of people and the question must be sufficiently challenging to ensure that there are clear winners.

Mr Marsh’s alarm has been fuelled by a spate of calls from lawyers around the country asking for advice about these prize draws. The society believes that solicitors are seeking advice only because they are being asked about these competitions by a growing number of clients.

Mr Marsh said: “There are significant risks to this method of selling, not just to sellers and buyers, but to the solicitors involved in the transactions.”

He added: “Currently there are a small number of homeowners looking into this method of selling, but judging by the rise in queries from solicitors to our Practice Advice Service about these kind of transactions, and the slowing in the market of the more traditional methods of selling a home, we could see more attempts at these competition-style sales.”

He suggested that anyone considering selling their house in this way should seek legal advice before establishing a prize competition. “The consequence of not doing so could result in them breaking the law and ignorance is no defence in law,” he said.

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