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Beware of “land banking” schemes

Beware of “land banking” schemes

Category: Investments

Updated: 07/12/2016
First Published: 03/02/2015

Land banking schemes are where a company sells you a plot of land with the potential that if planning permission is later granted on it, it will soar in value.

But it's often the case that the land sold by land banking schemes is protected – either as green belt, or a conservation area or similar, where planning permission is unlikely to ever be granted.

The result is that UK investors have lost an estimated £200 million, according to the Financial Conduct Authority (FCA).

How does land banking work?

A company has ownership of a large piece of land, which it then divides into smaller individual plots for sale to investors. Because the land is undeveloped, and may not have planning permission, the returns could be huge.

Often, first contact from a land banking company comes via a cold call but it could also be via an email or letter. The lure of such promised returns can sound too good to be true and, sadly, in a lot of instances they are. The land sold might be in a protected area where planning permission is never likely to be granted.

It's also increasingly the case that overseas investors have been duped into land banking scheme, with companies situated away from UK regulatory bodies in places like Dubai and Singapore.

Who's most at risk?

Obviously those most at risk are those who have the money to invest in a land banking scheme (you'd be unlikely to get a mortgage to finance this sort of purchase). These groups are particularly at risk:

  • Shareholders. Most land banking schemes choose to cold call investors using phone numbers taken from shareholder lists (this information is publicly available).
  • Expatriates or foreign nationals. Land banking schemes can use lack of knowledge about UK planning law to get investment from overseas.

How to protect against land banking investment scams

Most land banking companies appear very professional, with well-written and in-depth promotional literature, and sales staff able to answer any question you might have.

However, having the "gift of the gab" doesn't necessarily mean that all the information is truthful, so:

  • Don't believe the salesperson or company's assurances that the land will be granted planning permission.
  • Don't be pressured into making quick decisions.
  • Seek independent advice from a solicitor and a chartered surveyor. Any "independent" recommended by the land banking company may not be truly independent – so find your own advisers (see useful contacts at the bottom of this article).
  • Do your own research with the local planning authority to see if the land in question is ever likely to be granted planning permission.
  • Report suspicious companies to The Insolvency Service on 0300 678 0017 or by emailing Intelligence.live@insolvency.gsi.gov.uk. The Insolvency Service may be able to wind up a rogue land banking scheme.

What to do if you think you're a victim of a land banking scam

Land banking investment schemes may be regulated by the Financial Conduct Authority if it is a collective investment scheme.

Failing that, it is possible that The Insolvency Service (part of the Department for Business, Innovation and Skills) could take action against a land banking company if you have been misled over the investment you have made.

Contact details for these regulatory bodies can be found below.

Useful contacts

You can find out more information about land banking schemes in these help sheets from the Financial Conduct Authority and Land Registry.

Financial Conduct Authority Consumer Helpline

UK: 0800 111 6768
Outside UK: +44 (0)20 7066 1000

The Insolvency Service

UK: 0300 678 0017
Intelligence.live@insolvency.gsi.gov.uk
Online complaint form

Land Registry

UK: 0300 006 0411
customersupport@landregistry.gsi.gov.uk

The Law Society

+44 (0)20 7242 1222

Royal Institution of Chartered Surveyors

+44 (0)24 7686 8555

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

 
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