Homeowners urged to be aware of rules on 'house competitions'

Press release

Date: 10 October 2008

The Gambling Commission has moved to warn homeowners that attempts to sell homes using prize competition schemes could potentially fall foul of the Gambling Act 2005.

In response to the downturn in the housing market a small but growing number of homeowners have recently opted to use a prize competition as a method of realising the value of their homes. The Commission has been keeping a close eye on the recent developments with such house competitions and warns potential organisers to take note of its guidance and to take independent legal advice before proceeding.

Prize competitions are free of statutory control under the Act provided they require sufficient skill, judgment or knowledge to either deter a significant proportion of potential entrants from participating or eliminate a significant proportion who do enter. Schemes that do not meet the test of skill, judgment or knowledge set out in Section 14 (5) of the Act (see note 6 below) would be classed as lotteries.  

"Lotteries are the preserve of good causes and cannot be operated for private gain," said the Commission’s Deputy Chief-Executive Tom Kavanagh.

"Prize competitions are free of statutory control under the Gambling Act and can be run for profit but homeowners considering such schemes as an alternative to selling their house risk committing a criminal offence if they cross the boundary and stray into offering an illegal lottery.

"We already have questions over the legality of a small number of existing schemes and are in contact with the organisers."

The Commission has become aware of a number of schemes that are intended to operate as prize competitions in line with the Gambling Act 2005. Where the schemes are causing concern, we have taken the step of writing to the scheme operators in order to question whether the skill, judgment or knowledge element of their schemes to win a house is sufficient to meet the requirements of the Act, in particular the test at section 14(5).

The letters request information from the operators in order to assess whether the scheme does amount to a genuine prize competition, or whether it fails to meet the requirements of the Act and is, in reality, a lottery.  We have also advised such operators to seek legal advice before commencing or continuing and where they cannot assure themselves of the legality of what they are doing; to cease activity and return monies already taken.

Other homeowners considering such schemes are warned that promoting a lottery without an operating licence is an offence under the Gambling Act 2005. The Commission advises individuals considering or operating a scheme to consider the guidance published on our website and to take independent legal advice before proceeding.

We monitor the boundary between prize competitions, free draws and lotteries in order to ensure that those operating lotteries are properly licensed to do so. Prize competitions and free draws - The requirements of the Gambling Act 2005 - December 2009


Advice note on prize competitions and free draws: house competitions - May 2009

Notes to editors

The Gambling Commission

  1. The Gambling Commission (the Commission) regulates gambling in the public interest. It does so by keeping crime out of gambling, by ensuring that gambling is conducted fairly and openly, and by protecting children and vulnerable people from being harmed or exploited by gambling. The Commission also provides independent advice to government on gambling in Britain.
  2. The Commission is responsible for licensing and regulating all gambling in Great Britain other than the National Lottery and spread betting, which are the responsibility of the National Lottery Commission and the Financial Services Authority (FSA) respectively.
  3. The Commission does not comment on individual cases. This release is intended to ensure organisers are properly informed of the law not to seek to ban the operation of such competitions.
  4. The Commission is based in Birmingham and has powers to undertake prosecutions under the Gambling Act 2005.
  5. Homeowners running legitimate prize competitions whilst not covered by the Gambling Act should also note the requirements of HMRC.
  6. Section 14 (5) of the Gambling Act 2005 says:

    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:
    1. 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
    2. the requirement cannot reasonably be expected to prevent a significant proportion of persons who wish to participate in that arrangement from doing so.

    See the whole of Section 14 online, and HMRC’s guidance to lottery duty.

Further information

Further information is available from the Commission’s website.

Telephone John Travers on (0121) 230 6700, (07852) 124624 or email communications@gamblingcommission.gov.uk.