UK Insolvency Service warns against landbanking scams

LONDON: The Insolvency Service in the UK has issued another warning to the public to be on the alert against unscrupulous landbanking practices as these scams are on the rise. Since 2007, The Insolvency Service has closed down 49 landbanking companies in England and Wales that have collectively caused losses of over £30 million (RM150 million).

Since 2009, 39 companies were wound up with losses of £13.4 million, it said in a recent statement.

Landbanking involves a plot of land bought by “developers” and then sub-divided into a number of smaller plots which are then marketed under the pretext that planning permission will be granted for future development.

The Insolvency Service said it has seen a 100% increase over two years in the number of complaints about landbanking scams accepted for investigation. To date, nine directors of landbanking companies have been disqualified by The Insolvency Service for a total of 86 years. It is estimated that total losses from all landbanking scams exceed £200 million nationwide.

Landbanking scams first emerged in the UK several years ago, but in the last three years, The Insolvency Service has witnessed an increasing amount of activity in this area and an increase in the number of complaints it has accepted for investigation — seven cases accepted for investigation in 2009, 11 cases in 2010 and 16 cases in 2011.

Analysis of a sample of 35 landbanking “victims” from four scams closed down by The Insolvency Service’s actions (from June 2009 to the present) shows 67% of the “victims” were aged over 50, with nearly half (44%) being over 60 years old. The oldest investor was 85 years old. The sample also shows 60% of them are males.

Based on a sample of five cases (a case being a complaint that has been accepted for investigation) involving six companies and 156 investors, the average amount invested and lost by the “victim” of a landbanking scam is around £23,000. The amounts lost ranged from £5,000 to £300,000, it said.

Landbanking scams often offer plots of land to investors who are under the impression that the land will be developed in the future in order to make a substantial financial return. However, the land is usually sold to the investor without the necessary planning permission and in some instances it is green belt land, or protected from development by law and not likely to get planning permission.

“It’s clear that landbanking scams are designed to target the more vulnerable investor, many of them trusting pensioners who are eager to see a greater return on their savings or pension lump sum than they could ever expect from traditional savings and investments. Tragically this often leads them to rashly invest in what seems to be, on the face of it, safe ‘get-rich-quick’ schemes,” said Robert Burns, head of investigations at The Insolvency Service.

“We need to alert the public on the warning signs and the fact that if a scheme seems ‘too good to be true’, that’s usually because it is. The public needs to be aware that land sold in these schemes is nearly always sold without planning permission and promises that planning is likely or in place, are a tell-tale warning signal. A check with the local authority planning office should provide a quick answer on the prospects of planning permission. Many potential buyers, including those from overseas, might not be aware of this. The land registry also includes some helpful advice on its website.”

Mike Westcott-Rudd, UK Land Registry, head of corporate legal services, said: “We know that landbanking companies have sometimes used forged documents carrying a land registry stamp as an ‘official guarantee’ that either their plot of land already has or will gain planning permission.

“UK Land Registry is so far unaware of any landbanking schemes where planning permission has subsequently been granted. It is typical for plots of land sold in landbanking schemes never to be eligible for planning permission, for example, because the land is situated in the green belt. Those looking to invest should remember that UK Land Registry is not involved in the planning process at all.

“UK Land Registry is working with The Insolvency Service, the FSA and the police in a joint effort to raise public awareness and combat landbanking scams.”

Jonathan Phelan, the UK Financial Services Authority’s (FSA) head of unauthorised business concurred: “We’ve seen plots sold on a site of special scientific interest, one on a 45° slope, and another without any access to it. None of them stood a chance of getting planning permission and therefore none of them stood a chance of realising the ‘hope value’ that was promised by the company that sold the land.

“Most of the money placed with these companies disappears, and to make matters worse, as the firms are not authorised by the FSA, such investments are not covered by the Financial Services Compensation Scheme.

“This problem calls for a coordinated response and together we are tackling the threat posed by landbanks. Working alongside the FSA, UK Land Registry and the Police, the Insolvency Service has been an active partner in combating landbanks by closing them down and preventing more people from becoming victims.”

The Insolvency Service is an executive agency of the UK’s Department for Business, Innovation and Skills which has the power to investigate companies in certain circumstances, which may lead to the company being wound up. It cannot seek the recovery of funds on an individual basis nor can it provide advice on investment decisions. For more information on landbanking investment schemes, go to

This article appeared on the Property page, The Edge Financial Daily, October 28, 2011.

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