Booking a cottage this summer? Beware the holiday let that becomes a let down

Are you planning to book a villa or cottage this summer? Two groups that booked a property through HomeAway, sister company to Owners Direct, have lost thousands of pounds to fraudsters in a case that exposes the grave risks holidaymakers are exposed to when using these popular websites.

The victims, who contacted Money independently this week, had both used HomeAway.co.uk, which claims to be "the UK's number one holiday rentals site" and also operates OwnersDirect.co.uk. But both were defrauded out of more than £2,000, one as the victim of an entirely fictitious property listing, the other because a legitimate property listing was hijacked and emails intercepted.

The booking website's owners deny any responsibility and have told the victims that they have lost everything above the £700 maximum payout they may be able to claim from the site's insurance cover.

The cases reveal the lack of consumer protection for those paying money by cheque or bank transfer, and should serve as a huge warning to anyone booking a holiday cottage this summer, even if you have done it many times before. Last week, the National Fraud Intelligence Bureau warned that fake villas and apartments accounted for a third of total holiday fraud losses.

Diana Cinamon, who lives in London, has just lost over £2,600 after she booked and paid for a large cottage in Dorset she found on the HomeAway website. "I have used the company before, so followed the usual procedure of completing an inquiry form online asking if the house was available for Christmas week," she says. "The name of the owner, telephone number, mobile number and a space for contact by email were all provided."

She sent an email through the secure HomeAway site to what she thought was the owner and received an answer saying that the house was indeed available, and she had a an exchange of emails about whether linen was provided. She was told that if she paid the full amount in advance, she would receive a discount.

"Nothing seemed untoward. A contract using the owner's name and various other forms were sent through to me asking for payment to be made to the owner's accountant," she says.

She transferred £2,655 from her bank, the Co-op, to a Barclays account in London. When a promised confirmation email failed to arrive, and follow up emails prompted no response, she rang the owners, but they were away.

"Eventually I sent a text to ask what was going on, only to find that they had no record of the booking or my money transfer. The owners were genuinely shocked, having let the house often in the past with no problems.

"While HomeAway has been sympathetic, they are taking no responsibility and have claimed the owners' email must have been hacked and therefore it is not their fault. They do not appear to be that interested in finding out what happened despite the fact that it is their website that has been used," she says.

Christine Chapman also contacted Money with her holiday horror story. She was part of a group that booked and paid for a £2,000 villa in Spain only to find out that the whole property listing had been faked in the US, and they had paid for a phantom property.

Like Cinamon, they used HomeAway.co.uk, and says the website's staff have shown little interest in getting to the bottom of what happened.

"We have since been told that the villa was fraudulently advertised, but they are offering little or no support on what we can do to get our money back," she says. "Whenever we try to contact HomeAway we are told we have to telephone the US office as this is where the 'owner' was registered, even though her address is in Spain and her bank account is at a Barclays in London. We assumed they would have made sure the villa was legitimate before putting it up on their site, or at least be accountable for any fraudulent activity done through their site."

The terms and conditions on these sites absolve HomeAway of responsibility, but what if someone hacked the website, as Cinamon alleges, to intercept and redirect emails? HomeAway is adamant this has not happened.

The company sent her a response letter, which had "BRAND" instead of HomeAway in the text, suggesting it happens enough for there to be a stock letter. Certainly this is not the first time the company has been highlighted. Last year the Sunday Times featured a similar case of a reader who paid £3,000 for a non-existent villa in Portugal. This had been listed on HomeAway's sister website OwnersDirect.co.uk.

A spokeswoman for HomeAway told Money less than 0.1% of bookings are affected by fraud. "Like any internet business, HomeAway.co.uk isn't immune from criminal activity; however, we remain dedicated to providing a secure marketplace for holiday rentals," she added. "Our Security Centre contains information about both phishing and fraud and provides tips on how holidaymakers can safeguard against this. We will continue to invest in technology and evolve our methods as needed. We know even one ruined holiday is unacceptable."

It has also said Chapman should not have been asked to work with the US team and has offered to cover the cost of calls to its US offices.

How to protect your booking

The big problem with booking holiday cottages over the web is that you never can be entirely sure you are talking to (and paying) the real owner. Look for those who accept credit cards – a few now do – which is the only way to protect your payment against fraud.

Be wary of homes that look too cheap. Before handing over any money, speak to a real person. Always call, don't just email. Use the phone number on the holiday rental site.

Check how long the property has been listed. Most listings sites show how long the owner has advertised. The longer, the better, although this didn't help Cinamon. Be wary if the "owner" offers a discount if the whole bill is paid up front. Most bookings require a deposit, with the balance payable a month or two before the trip. Try to pay in cash when you arrive, although few owners will accept this, for fear of no-shows.

Google the property to confirm your desired holiday home actually exists. See if it's listed elsewhere under a different owner. Ask for references. As well as reading reviews, ask for references from previous visitors and phone them (if possible).

HomeAway offers those making a booking a free policy that will pay up to £700 if the booking turns out to be fraudulent. But it will only payout if you can prove you followed its booking guidelines to the letter. Note that £700 will not cover the cost of many properties on the site. To add full cover you will pay around £27 a week, with an add-on bought policy, offered by Europ Assistance. The OwnersDirect site offers a very similar terms.