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Thinking of investing in land?

An increasing number of disappointed investors are making complaint, having been snared into "land banking" schemes.

Invariably, a cold call from a company with an impressive name prompts the private investor to show an interest in the concept of buying land on the hope that one day, it will be the next Cribbs Causeway or (dare I say) Bradley Stoke. Buy land - after all, they aren't making any more of it!

The reality of many of these schemes is that a "developer" buys a farmer's field for £10,000 and sells small parcels of it to 100 people for £10,000 each.

It's easy to see how he makes his money - but usually very hard indeed to see how the "investors" will ever recoup their investment, let alone the pie-in-the-sky profits which the telesales callers predict. Sometimes land will be protected green belt, an Area of Outstanding Natural Beauty or even a Site of Special Scientific Interest - nevertheless it is touted as having "excellent development potential" for the future.

Anyone who has sat on a committee will be able to guess how hard it would be to get all of these "landowners" to work together on a planning application even if one were to stand a chance of success.

The promoters of these schemes will go to great lengths to take as much of their target's savings as possible. Simply investing a little is not an option as the pressure mounts to buy more and more plots. People find themselves suckered into multiple land deals until they finally see the light.

The promoters will also try to make it easier for investors not to take independent legal advice on the matter - sending witnesses round to witness signatures for example, so that the investor is not at risk of mentioning this "wonderful opportunity" to a more sceptical neighbour or advisor. Keep it between ourselves, eh - don't want to let everyone else onto such a good thing.

In these circumstances, a careful analysis of the legal and contractual position is called for. Robust letters followed by swift court action are often required to protect the investor's rights. A thorough review of the sales process can identify chinks in the armour these people hide behind and go some way to recovering funds. Police involvement can be sought - but the schemes are careful to avoid scrutiny of the authorities wherever possible.

Until legislation brings this form of investment within the regulated Financial Services sector, investors should be careful to take full independent advice before parting with any funds. Those who have lost out to such schemes should have the process reviewed by an experienced Solicitor in case there is a prospect of recovering some funds.

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