How to protect yourself from land banking scams

Land banking - when a company sells you a plot of land with the promise that it will soar in value if planning permission is granted - is still claiming a huge number of victims.

In total, UK investors have lost an estimated £200 million so far, according to the Financial Conduct Authority (FCA), and the practice is still alive and kicking.

How does it work?

Usually, it starts with a cold call. But sometimes it's an email or a letter.

A highly professional salesperson, often using high pressure sales tactics and stressing the need for urgent action on your part, will try to persuade you to buy a small, individual plot of land which is part of a larger piece owned by them.

They will tell you that because the land is undeveloped, the returns could be enormous once it has planning permission. They will often follow up the call by sending you glossy, well-written and detailed promotional literature.

Tempted? Don't be.

The potential for gain may sound too good to be true and that's because, in most instances, it is.

Often, the land is protected - as part of a green belt, a conservation area or even sometimes a Site of Special Scientific Interest or Area of Outstanding Natural Beauty - and as a result, it's highly unlikely that planning permission will ever be granted which leaves you with a practically worthless piece of land.

How do you spot a land bank scam?

Often, it's the style of selling that should set alarm bells ringing.

The promoters of these schemes will often go to huge lengths to lure you into buying multiple plots of land - simply investing a little is not an option as their aim is to target as much of your savings as possible.

They will also be keen to steer you away from using a solicitor to handle the deal and will try to make it easier for you not to take any independent advice at all - sending their own witnesses round to witness signatures, for example, so there's little risk of you mentioning this 'wonderful opportunity' to a more sceptical friend, neighbour, relative or advisor.

How do you protect yourself?

• Be aware that these scams exist - being informed makes you less vulnerable;
• Be sceptical about assurances that the land in question will definitely be granted planning permission - do your own research with the relevant local planning authority to check the likelihood of this out for yourself;
• Don't be pressured into making quick decisions;
• Take independent advice from a solicitor who you find yourself - not one 'recommended' by the land banking company.

Why haven't land scams been stopped?

The Financial Conduct Authority does not regulate the sale of land - in fact, there is nothing illegal in selling off small plots of land. As a result, you won't have access to the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) if things go wrong.

But the FCA can get involved if a land banking scheme can be deemed a collective investment. This does require FCA authorisation so if an unauthorised company promotes or operates a collective investment, the regulator can act.

This happened in 2016 when the FCA won a case in the Supreme Court against Asset Land. In this instance, investors were persuaded to buy individual plots of land for between £7,500 and £24,000 with the promise that the land would increase in value if it got planning permission or was re-zoned.

Asset Land Investments plc and Asset Land Investments Inc were ordered to make a payment of £21 million as part repayment for investors - although it might be considered unlikely that those who lost out will ever actually receive any money.

What to do it you think you have been approached by an unauthorised firm

If you are suspicious, take contact details from the caller and pass on to the FCA - its consumer helpline number is 0800 111 6768. You could also contact the government's Insolvency Service.

Until legislation offers more protection, it is vital to take full independent advice before parting with any money. And if you have already done so and lost out, it may be sensible to have the process reviewed by an experienced financial services solicitor to see if there is a chance of recovering some funds.

If you need help or advice about a land bank scheme, please contact James Taylor who deals with Financial Services Disputes at Wards Solicitors.