Don't be conned into buying a worthless plot of land, warns property expert
Many unsuspecting investors are being conned into
buying land that has little or no chance of ever being developed.
Land banking schemes are marketed as a way to invest cheaply in
land that has apparent potential.
A promoter buys a large piece of land, divides it into plots and
sells each plot to an investor, who is promised they’ll see a large
return once planning is obtained and the land can be sold or
The marketing is slick. The title is registered at the Land
Registry and the investor is persuaded to part with their money
quickly without undertaking any relevant searches or enquiries
about the true status of the land they’re purchasing. The seller
may even offer to register the transfer at the Land Registry so you
get good title, convincing you that there’s no need to involve
According to the Financial Services Authority, the number of
complaints about land banking schemes has been rising as more
people discover they have invested in a plot of land that has
little development potential.
It may be in the Green Belt, for example, which means the
promoter has bought it cheaply, perhaps at agricultural value, just
to make a quick return on the plot sales.
The Land Registry is obliged to make the plot registrations
(unless it considers there is some title fraud being perpetrated on
the landowner /promoter, not the individual buyer). The buyer’s
then left with a registered title to a plot of land which is never
likely to be developed, while the seller (usually a company formed
just for the project and with no other assets) has pocketed the
money and disappeared.
The FSA does not regulate the sale of land but it does regulate
collective investment schemes (CIS) and a firm must be authorised
by the FSA to promote or operate a CIS in the UK. The FSA can only
take action over a land banking scheme when it is being promoted or
operated as a CIS without authorisation.
The scheme may be a CIS where investors do not have day-to-day
control over managing their plot. The scheme involves pooling
investor funds and the operator is responsible for managing the
scheme. It is possible to sell plots of land without the scheme
being a CIS, so many land banking schemes are set up to avoid the
characteristics of a CIS.
The FSA estimates that schemes which con investors into buying
worthless plots of land are now costing consumers as much as £200
million a year.
So if you’re offered such an investment, speak to the local
authority planning department and make sure you seek legal