Everything You Need To Know About Landbanking Scams

Scam illustration

Landbanking scams have cost property investors hundreds of millions.

The con is when a landowner carves up a larger site into small strips to sell the plot promising if planning permission is granted, the price of the land will soar in value.

Of course, this will never happen because the land is either unsuitable for development or protected from building, such as sitting within the green belt or a conservation area.

The victims then face a battle to get their money back.

Consumer watchdog the Financial Conduct Authority reckons landbanking scams have stolen around £200 million from unwary investors.

How Landbanking Scammers Work

The premise is investors are buying land earmarked for development cheap and that their outlay will soar in value when planning permission is granted.

The sting is the land is all but worthless and the promised profits will never emerge because the land is unlikely to have planning granted.

Too add to the financial misery, the sellers often attach covenants to the land demanding the buyer should contribute towards building infrastructure, such as access roads and drainage, even though they will never be built.

The fraud starts with a company buying a tract of land which is divided into smaller plots.

The average price per acre paid by a scammer is £10,000 while the mark-up on the subdivided plots is as much as 3,000% to £30,000.

The sellers then put together a list of investors usually copied from lists of company shareholders.

Then the company contacts the potential investors by phone, email or post. The salesman paints a picture of how the return the investor is likely to see in a relatively short while, sweetening the deal with discounts if they sign up straight away.

The scammers tend to miss out the bit about the land is unlikely to gain planning permission in their presentations and brochures.

Many of landbanking victims traced by the Financial Conduct Authority (FCA) live in the Asia Pacific and had no likelihood of seeing their investment before buying.

Profile Of A Landbanking Victim

Scammers are not fussy about their victims – anyone with money will do.

But in the case of landbanking, shareholders seem to be the most vulnerable because they have a history of investing, money to fund the purchase and a public list of their name and address. British landbanking investors tend to be in their 50s or older and homeowners.

Many landbanking scams are widely publicised in the Asia Pacific. Foreigners are typically cash rich with little or no knowledge about planning matters in the UK. Also, few Asia Pacific countries have tough financial regulators like the UK.

Safeguarding Yourself Against Scammers

Investing in land is not a regulated investment, so buyers cannot go to the Financial Ombudsman Service or Financial Services Compensation Scheme when the deal turns sour.

Here are some safeguards to consider:

  • If a landbank salesman gets in touch find out as much as you can about the land – including the postcode, size and exact location of the plot.

Take this information to the local planning authority for the place where the land is located and ask them about the land’s development potential.

You can find out who the planners are by putting the land’s postcode into the RESI web site search tool

  • Check the small print of the contract as well. Most landbankers rely on a contract clause that means they do not have to refund money to investors if the land does not receive planning permission, which they know it won’t
  • Although the sale of land is not regulated in the UK, businesses that are involved in landbanking as an investment must register with the FCA as a collective investment scheme. If the scheme does not register, the FCA can act.

Other sensible precautions mean taking independent advice rather than guidance from the landbankers.

Reporting A Landbanking Scam

If you believe landbanking scammers have contacted you, you can report the incident to the FCA by calling 0800 111 6788 or by filling in an online form.

The government’s Insolvency Service investigates companies trying to dupe consumers or committing fraud. You can report the scam online.

Getting Your Money Back

Investors in some landbanking schemes can get their money back through the FCA.

The latest call has gone out to investors who lost £3 million in a scam by Synergy Land Group and director Simon Exall.

The company told investors land at Cheltenham Manor would be divided and managed with the intention of selling the entire site. Exall promised big profits when planning permission was granted for the site – which it wasn’t.

The FCA and City of London Fraud Squad investigated the business. The company’s assets were frozen and Exall was jailed for four years for conspiring to defraud his investors.

Some money was raised from the sale of Exall’s assets which is available to investors as compensation.

Investors should email: [email protected] or write to the FCA at Freepost RTZE–RHAL–URAJ, for the attention of UBD AJS RE01079, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.

Landbanking FAQ

Landbanking is an activity that seems to slip through the cracks of legality.

Selling land to investors who hope for a profit is not a crime and until promised planning permission is refused, landbanking does not become a scam.

Hundreds of investors worldwide are persuaded to part with their cash often by slick salesmen who close deals on the hope of big profits.

If you want to know more about landbanking, here are the answers to some most asked questions.

What is landbanking?

Landbanking is a popular way for developers to buy land in readiness for development. Supermarket chains, house builders and other developers buy up plots for future development regularly.

However, landbanking becomes a scam when the sellers tell lies about the development potential of a plot of land, knowing the promises they make will never be fulfilled.
Typically, a field is bought and divided into house size plots. Each plot is sold at a hyped price and some come with annual management charges that lock investors into expensive outlays for many years.

How do the scammers get away with it?

Unless the scammers break investment rules or commit fraud, there’s little that stops them plying their trade. Landbanking is not a crime – it’s the way the sellers go about it that makes landbanking a scam.

How do I report a landbanking scam?

Contact the Financial Conduct Authority or Insolvency Service and give them as much detail about the landbankers as you can.

How do I know if I am a landbanking victim?

If you have been offered land with the promise of a huge profit when planning permission is granted, you are a landbanking victim.

Think about the proposition – the landbankers already own the land and could keep the profits if planning permission is granted, so why would they want to share such good fortune unless there’s a catch?

Does landbanking only take place in the UK?

No. scheme have been investigated all over the world, including Panama, Ukraine, Brazil, Bulgaria, Sierra Leone and Ghana.

Below is a list of some related articles, guides and insights that you may find of interest.

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