Land bank scam warning for property investorsMake Text Bigger
Land banking firms typically sell small tracts of undeveloped land on the premise that the value will soar as the plot lies in the path of a new development.
But the dreams of riches that lure unsuspecting investors to part with their cash are just that – lies made up by the sale people, according to an anonymous former salesman.
‘Gareth’ allegedly told the BBC that the sales tactics and false promises peddled by Property Partnership were deplorable and forced him to leave to remain true to his conscience after only three months.
“You are told if you just stick with the company for 12 months they guarantee you will be a millionaire,” he told the BBC.
He also spilled the beans on tough sales tactics, like embellished scripts aimed at persuading innocent investors to part with their savings.
One investor, William McNaught, told the BBC that land he bought for £10,000 in 2009 at Towcester, near the Silverstone motor racing circuit, is worth a paltry £75.
The Financial Services Authority regulates investment advice and has stopped five land banking firms trading this year after land transactions worth around £42 million had taken place – and is probing the investment promises and sales tactics of another 20 firms.
Land banking firms exploit a financial regulation loophole if they liaise between a group of investors and developers. If they do, the advice falls under collective investment scheme rules governed by the FSA.
The National Fraud Intelligence Bureau (NFIB) is also probing land bank scammers and has warned investors not to hand money to someone who promises land will significantly increase in price because:
- The plots are in areas with high house prices
- The land is earmarked for new house building to meet government targets
- The land is close to a plot already allocated for development
In reality, says the NFIB, investors are sold land that has little or no development potential because planning permission is unlikely to be granted in the foreseeable future. In some cases, the land does not exist or does not belong to the seller.
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