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The Insolvency Service has seen a rise in landbanking scams, complaints have gone up by a third since 2009 at a cost of £13.4million.
The scams involve a company selling portions of land to investors with the false pretence of planning permission only for the land to be found to be Green Belt and planning permission impossible.
The Insolvency Service have so far banned 9 directors of landbanking firms for a combined 86 years, and they believe total losses form landbanking scams have been £200million. In 2009, 7 cases were accepted but in 2011 so far there have been 16.
Head of Investigations at The Insolvency Service, Robert Burns, said -“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.”
Most of the victims of these scams are over 50 years old and 44% are over 65.
“We need to alert people to 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, is 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 now being targeted from overseas, might not be aware of this. Land Registry also includes some helpful advice on its website.” Said Mr Burns.
Jonathan Phelan, the FSA’s Head of Unauthorised Business, offered a plan of action and what to look out for. “We’ve seen plots sold on a site of special scientific interest, one on a 45-degree 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. As land banks often snare new investors by cold calling them, the lesson remains: if you are called out of the blue with the offer of land that is ‘guaranteed to rocket in price’ – be very suspicious indeed.
“This problem calls for a coordinated response and together we are tackling the threat posed by land banks. Working alongside the FSA, Land Registry and the Police, the Insolvency Service has been an active partner in combating land banks by closing them down and preventing more people from becoming victims.”
Landbanking scams often forge letterheads with the Land Registry logo, added Mike Wescott-Rudd, Head of Unauthorised Sales, warning “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 Land Registry is not involved in the planning process at all.”
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