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Landbanking scams

Are you looking for a great investment opportunity? Do you want to buy a small plot of farmland which, with an ever growing population, will make a sizeable profit when houses are built on it?

This activity is often referred to as 'landbanking'. Be warned though, the promises of some unscrupulous 'landbanking' scheme operators can turn out to be false.

How does it work?

Small plots of agricultural land are advertised on the internet or over the phone as investment opportunities. Stands are also taken at lifestyle exhibitions promoting these investments. Plots are often sold in areas where house prices are high, near to urban areas or to land zones allocated for development. Potential investors are told that once planning permission is granted the land can be sold to a developer for a substantial profit.
Unscrupulous sellers use misleading advertising and high pressure techniques to persuade potential investors to purchase agricultural land at vastly inflated prices when there is virtually no development potential. They will make exaggerated and dubious promises, giving the impression that planning permission for development is virtually 'guaranteed' and that the value of the land is bound to rise.

In reality the land may be totally unsuitable for residential development and have little hope of ever getting planning permission. It could, for example, be located in an area of outstanding natural beauty, a site of Special Scientific Interest, within a flood risk area or on geologically unsuitable ground. The true value of the land might only be a fraction of the thousands of pounds that the investor paid for it and the only person who profits is the seller. The land often ends up abandoned and neglected.

How to protect yourself

  • Question any claims made or any assurances that your investment will make money.
  • Investigate the company carefully before you commit any funds.
  • Take independent professional advice about the status of the land for sale and future development potential before parting with any money.
  • Check with the local authority planning department to ascertain how likely it is that planning permission will be granted in the future.
  • Dependant upon their structure, landbanking schemes may also 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.

If you think you have been a victim of this scam call Consumer Direct for advice on 08454 040506.


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