Landbanking: the plots thicken

Published 08th Nov 2009

Potential purchasers should steer clear of investment schemes that are not authorised by the FSA


Double, treble or multiply your money even further – and all within a few years. It sounds an ideal alternative to low-interest savings and high-risk shares, especially, as the promoters point out, "They're not making land any more".

Gains like these are held out by "landbankers", unregulated firms that buy land without planning permission to sell to investors in small slices. Purchasers are led to expect the field will get the go-ahead for housing development, seeing it explode in value.

But the winners are the promoters rather than the investors. Typically, landbankers buy land for under £10,000 an acre and then cut it up into plots of one-tenth of an acre. They sell these plots to investors for £8,000 to £16,000 each – earning them around £80,000 to £160,000 an acre.

Over the past five years, Guardian Money has warned that, despite taking in tens of millions of pounds from investors, no landbanker has ever delivered the expected profit bonanza that comes with planning permission.

Instead, we have reported how several landbankers have gone bust, including Land Heritage (UK)* and United Land Holdings, leaving buyers with virtually unsellable plots. These investors had no chance of getting their cash back from a compensation scheme, as land sales are not protected by the Financial Services Authority. In 2007 the FSA declared that although it does not regulate land as an investment, "there is a risk that many of these schemes are in breach of the financial regulation regime if they are structured as a 'collective investment scheme'. To operate and promote such a scheme legally, the operators would need to request and obtain authorisation from the FSA, which would then regulate these firms."

But now one landbanker claims it has found a way around the FSA's rules. Panama City-registered Asset Worldwide Group is selling 400 plots in a 20-acre site without planning permission in Lutterworth, Leicestershire. It has no authorisation from the FSA. Potential investors are told a plot of land will cost £16,000, but that it could be worth much more within a few years.

Asset Worldwide claims the site had a form of planning permission in the 1970s. It says the local council, Harborough District Council, has included the site in its local "Strategic Housing Land Availability Assessment". Sited next to one of Europe's biggest distribution centres, it claims the land is "on radar" and that the local Narborough [sic] council is "always looking to increase the amount of affordable housing".

Harborough District Council, which includes Lutterworth, says it has received many enquiries about land Asset Worldwide is selling – and that planning permission remains remote. It says the land is "unlikely to be allocated or granted permission for housing in the future."

Asset Worldwide, which operates from a central London address and has a UK-registered PLC run from an Essex address, says on its website that "it is not regulated by the FSA" and "does not give investment advice".

It continues: "Neither Asset Land Investments nor any person connected with it will have any role in pursuing re-zoning or planning permission." It gives no guarantee of future values.

So how can it promote an apparent collective investment scheme but not be authorised by the FSA? Callers to Asset Worldwide are told that planning applications and future sale will not be handled by them, but could be carried out by Greenwood Bell, a firm in Welwyn Garden City.

But when Guardian Money contacted Paul Brettell, who set up Greenwood Bell in 2004, he said: "My role is simply to make assessments on the land. It [Asset Worldwide's website] quite clearly states that the land they sell does not form part of a collective investment scheme."

Contacting Asset Worldwide was more difficult. It failed to return our calls, but eventually replied to an email request for an interview, saying: "It is holiday week in Panama and all directors are away for celebration."

The FSA says that if "individual investors do not have day-to-day control over the planning or disposal process, the arrangements are likely to amount to a collective investment scheme." This would require authorisation.

It warns that if a landbanking scheme is unauthorised, you will not be able to use the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong. But if you have agreed to take part in a landbanking collective investment scheme run by an unauthorised person, you may have a right to recover your money because agreements which an unauthorised person enters into while operating, advising on or arranging a collective investment scheme cannot necessarily be enforced.

*Organic farming charity Land Heritage has asked us to point out that it has no connection to Land Heritage (UK).

Source: ' Guardian '

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