Land banking scams on the increase
Land banking is where an area of land is acquired, by alleged ‘developers’, which is then sub-divided into smaller plots . These are then sold, often under the false pretext that planning consent for development will be granted. Needless to say, prices are grossly inflated above true values.
I am pleased to say that we have not had many enquiries for land finance for this type of thing, though we had a recent enquiry, for farm finance, where the customer was trying to refinance land that apparently had huge hope value. He had a valuation report to back it up but we were not convinced.
These scams first reared their ugly heads several years ago, but over the last three years, The Insolvency Service has seen an increasing amount of activity and an increase in the number of complaints it has accepted for investigation. Seven cases were accepted for investigation in 2009, rising to 11 in 2010 and 16 in 2011 to date. Since 2007, that part of the Insolvency Service called Company Investigations has shut down forty-nine land banking companies, in England and Wales, that have caused collective losses to the public of over £30m. It has warned that land banking scams are increasing, with a 33 per cent rise in the number of complaints it has received during 2009 to 2011 and it is estimated that total losses from all land banking scams exceed £200m nationwide. Thirty-nine companies, that caused losses of over £13m, have been wound up since 2009. To date, nine directors of land banking companies have been disqualified.
The land marketed in these schemes is nearly always sold without planning permission but promises that it is likely or in place and this should act as a warning. A check with the local planners should provide a quick answer on the prospects of planning consent. Apparently, many buyers especially those targeted offshore may not be aware of this.
Remember – if it’s too good to be true it probably it probably is not true.