Newsroom

Press releases 2007

Consumers warned to avoid land sale scams

166/07 28 November 2007

The OFT and the Insolvency Service, along with enforcement partners in the Scams Enforcement Group, are warning consumers looking for an investment opportunity to be wary of unscrupulous 'landbanking' scheme promoters.

Small plots of agricultural land have been advertised as investment opportunities on the internet, through telesales, or at stands taken at lifestyle exhibitions. This activity is often referred to as 'landbanking'. Plots are often sold in areas where house prices are high, near to urban areas, or to land zones allocated for development.

Some unscrupulous sellers have made millions of pounds by duping investors into buying unsuitable land at vastly inflated prices in the belief that the land has residential development potential.

Misleading advertising and high pressure techniques have been used to persuade potential investors to pay up to £10,000 for a plot of land on the basis that planning permission for development is virtually 'guaranteed' and that the land can be sold to a house builder for a large profit. In reality the land may be totally unsuitable for residential development and have little hope of ever getting planning permission.

There have been examples where the land offered for sale was located in an area of outstanding natural beauty, a site of special scientific Interest or on geographically unsuitable ground. Often the land ends up abandoned and neglected.

The Insolvency Service's Companies Investigation Branch has shut down a number of companies behind 'landbanking' scams including four related companies who scammed investors of nearly £5 million. Depending upon their structure, some landbanking schemes may also constitute a 'collective investment scheme' and need to be authorised by the Financial Services Authority.

The OFT's advice to anyone thinking of investing in land is to always:

• question any claims made or any assurances that your investment will make money
• take independent professional advice about the status of the land for sale and future development potential before parting with any money
  ascertain from the local authority planning department how likely it is that planning permission will be granted in the future, and
• investigate the seller carefully before you commit any funds.

Mike Haley, OFT Head of Consumer Protection, said:

'Unscrupulous landbanking operators aren't looking to make you rich, only themselves. Don't fall for their dubious claims, ask questions, and do some research before parting with your money.'

Robert Burns, Head of Insolvency Service's Companies Investigation Branch, said:

'We have investigated a number of suspicious landbanking companies. Don't be fooled by glossy brochures or be pressurised by persistent salesmen. The best way to defeat these types of scammers is to challenge everything, do your homework and be prepared to say 'no' if it looks too good to be true.'

Anyone who is unsure about an investment opportunity can contact Consumer Direct for advice on 08454 0405 06.

Kind acknowledgement from the OFT Newsroom press release 2007 number 166/07 28 November 2007