Landbanking scams
Are you looking for a great investment opportunity? Do you want to buy a small plot of farmland which, with an ever growing population, will make a sizeable profit when houses are built on it?
This activity is often referred to as 'landbanking'. Be warned though, the promises of some unscrupulous 'landbanking' scheme operators can turn out to be false.
How does it work?
Small plots of agricultural land are advertised on the internet or over the phone as investment opportunities. Stands are also taken at lifestyle exhibitions promoting these investments. Plots are often sold in areas where house prices are high, near to urban areas or to land zones allocated for development. Potential investors are told that once planning permission is granted the land can be sold to a developer for a substantial profit.
Unscrupulous sellers use misleading advertising and high pressure techniques to persuade potential investors to purchase agricultural land at vastly inflated prices when there is virtually no development potential. They will make exaggerated and dubious promises, giving the impression that planning permission for development is virtually 'guaranteed' and that the value of the land is bound to rise.
In reality the land may be totally unsuitable for residential development and have little hope of ever getting planning permission. It could, for example, be located in an area of outstanding natural beauty, a site of Special Scientific Interest, within a flood risk area or on geologically unsuitable ground. The true value of the land might only be a fraction of the thousands of pounds that the investor paid for it and the only person who profits is the seller. The land often ends up abandoned and neglected.
Examples of 'landbanking scams':
An investigation has discovered a land sales scam and a company marketing plots of land on behalf of a 'landbank' business has been wound-up by the High Court in Manchester.
An internet 'landbanking scam' has been exposed and three companies involved in selling plots of agricultural land to the public have been wound up in the High Court.
A five million pound 'landbanking scam' has been exposed and four companies involved in selling plots of agricultural land to the public have been wound up by the High Court.
How to protect yourself
- Question any claims made or any assurances that your investment will make money.
- Investigate the company carefully before you commit any funds.
- Take independent professional advice about the status of the land for sale and future development potential before parting with any money.
- Check with the local authority planning department to ascertain how likely it is that planning permission will be granted in the future.
- Dependant upon their structure, landbanking schemes may also constitute a 'collective investment scheme' and need to be authorised by the Financial Services Authority. Contact the FSA Consumer helpline on 0845 606 1234 for advice. The FSA have issued further consumer information on their Money Made Clear website.
What to do if you are unsure
If you are unsure, or you do not want...
…a mailing
- check if the mailing comes from a member of the Direct Marketing Association
- to reduce unwanted mail register, free, with the Mailing Preference Service, call 0845 703 4599
- registering will make it easier for you to spot a scam in your mail. If in doubt, bin the letter.
…a telephone call
- Telephone Preference Service (TPS) - to reduce unwanted sales calls register your telephone number, free, with the TPS, call 0845 070 0707
- number block service - many telephone companies offer this service. It blocks callers from the UK and Channel Islands who withhold their number
- call barring - you can bar all calls to premium rate services and/or international rate numbers. Some phone companies charge for this service
- if in doubt, hang up.
…a text message
- you cannot be charged for receiving a text unless you sign up to a service
- if you are signed up to a text message service you don't want text the word STOP - and the service has to end immediately
- to reduce unwanted sales text messages register your details with the TPS (see above)
- if in doubt, don't reply.
…an email
- use anti-virus software and a firewall. Keep them up-to-date
- don't email personal or financial information
- be cautious opening any attachment or downloading any files from emails you receive, regardless of sender. These files can contain viruses or other software that can weaken your computer's security
- if in doubt, don't reply.
