Newsroom

Consumers warned to avoid land sale scams

166/07    28 November 2007

The OFT and the Insolvency Service, along with enforcement partners in the Scams Enforcement Group, are warning consumers looking for an investment opportunity to be wary of unscrupulous 'landbanking' scheme promoters.

Small plots of agricultural land have been advertised as investment opportunities on the internet, through telesales, or at stands taken at lifestyle exhibitions. This activity is often referred to as 'landbanking'. Plots are often sold in areas where house prices are high, near to urban areas, or to land zones allocated for development.

Some unscrupulous sellers have made millions of pounds by duping investors into buying unsuitable land at vastly inflated prices in the belief that the land has residential development potential.

Misleading advertising and high pressure techniques have been used to persuade potential investors to pay up to £10,000 for a plot of land on the basis that planning permission for development is virtually 'guaranteed' and that the land can be sold to a house builder for a large profit. In reality the land may be totally unsuitable for residential development and have little hope of ever getting planning permission.

There have been examples where the land offered for sale was located in an area of outstanding natural beauty, a site of special scientific Interest or on geographically unsuitable ground. Often the land ends up abandoned and neglected.

The Insolvency Service's Companies Investigation Branch has shut down a number of companies behind 'landbanking' scams including four related companies who scammed investors of nearly £5 million. Depending upon their structure, some landbanking schemes may also constitute a 'collective investment scheme' and need to be authorised by the Financial Services Authority.

The OFT's advice to anyone thinking of investing in land is to always:

• question any claims made or any assurances that your investment will make money
• take independent professional advice about the status of the land for sale and future development potential before parting with any money
  ascertain from the local authority planning department how likely it is that planning permission will be granted in the future, and
• investigate the seller carefully before you commit any funds.

Mike Haley, OFT Head of Consumer Protection, said:

'Unscrupulous landbanking operators aren't looking to make you rich, only themselves. Don't fall for their dubious claims, ask questions, and do some research before parting with your money.'

Robert Burns, Head of Insolvency Service's Companies Investigation Branch, said:

'We have investigated a number of suspicious landbanking companies. Don't be fooled by glossy brochures or be pressurised by persistent salesmen. The best way to defeat these types of scammers is to challenge everything, do your homework and be prepared to say 'no' if it looks too good to be true.'

Anyone who is unsure about an investment opportunity can contact Consumer Direct for advice on 08454 0405 06.

NOTES

1. This year Companies Investigation Branch of the Insolvency Service have wound up a number of companies involved in landbanking including Townfield Land Investments Limited, Libertas Land Limited, Southwold Site Management Limited, United Land Holdings, United Property Holdings, Land Investment Association, United Land Acquisitions and Actionjack Limited. Further details are available on the Government News Network website.

2. The Insolvency Service carries out confidential enquiries on behalf of the Secretary of State for Business Enterprise & Regulatory Reform through Companies Investigation Branch. The Insolvency Service administers the insolvency regime investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice.

3. Dependant upon their structure, landbanking schemes may 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.

4. More information regarding landbanking can be found in the scams area of this website.

5. Combating scams is an OFT priority. The OFT launched a Scambusters team and set up the Scams Enforcement Group with partner organisations focussing on law enforcement; consumer education; and cooperation with private sector businesses to disrupt scammers' routes to market.

6. Consumer Direct is a telephone and online consumer advice service funded by government and managed by the Office of Fair Trading. It offers clear, practical and impartial advice and information about consumer rights.

Back to:2007