The UK Financial Services Authority has warned that land banking schemes that allow people to purchase plots of land with hopes of gains from future development have cost investors £200 million. The schemes also prey on foreign investors who are not familiar with how British land development laws work. Many plots that are sold have zoning restrictions or are located in agricultural areas that will never be developed. Other plots have been broken up into pieces among many separate owners, making it less attractive for commercial purchase. The Land Registry’s Corporate Legal Services has produced a new buying guide that warns of these pitfalls and offers advice t potential buyers. For more on this continue reading the following article from PropertyWire.
The UK’s Land Registry is warning people not to buy through land banking schemes as it is revealed that victims losses have reached £200 million.
It has updated its guide on land banking to warn the public about the risks involved in buying land forming part of a land banking scheme.
These are schemes where it is claimed that the plots of land have good investment value in the expectation of future development but where there is little or no chance of land ever being developed.
The Financial Services Authority (FSA) recently estimated that land banking schemes have cost UK investors as much as £200 million.
The updated guide now includes contact details for organisations that can recommend independent advisers to members of the public considering investing in a land banking scheme. It also explains the role of regulatory bodies relating to land banking as well as how to report instances of such activity.
‘We know that many investors, living both in this country and abroad, hand over thousands of pounds for land that has little or no chance of being developed. Some companies offer UK land plots from the Far East where the local authorities do not regulate such activities, or are not aware of the high risk nature of the investment,’ said Jane Allen from Land Registry's Corporate Legal Services.
‘Anybody considering buying land for its investment potential should read our guide. By publishing this updated version, we aim to improve public awareness of the risks of investing in land banking scheme. However, individuals should not assume that we think any particular scheme is a poor investment or that land within a specific scheme is unsuitable for development,’ she added.
This guide is intended to warn the public about land banking investment schemes where a landowner divides their land into many small plots for sale and where it is claimed that the plots have good investment value usually in the expectation of future development.
Many investors have been persuaded to pay thousands of pounds for land that has little or no chance of ever being developed.
The guide recommends that anybody considering buying land for its investment potential should consult an independent professional adviser registered with the Royal Institute of Chartered Surveyors and for legal advice the Law Society.
The guide also points out that the land offered in these kind of schemes is often located in green belt or areas protected from development by planning law. Or it could be agricultural land where no development is ever likely to be permitted.
The plots may be offered for sale to both domestic and overseas buyers. The focus is on the potential future value of the land against the current selling price. Sellers will typically not mention the fact the land is protected or green belt land and cannot be developed under current planning regulations.
Even where the land does have development potential, subdivision into small plots held by different owners may make it less attractive for acquisition by a company seeking to develop the site.
It adds that those operating land banking schemes often claim that they have well known banks, other lending institutions and established developers as their partners when this is not the case.
Members of the public have sometimes also been led to believe that planning permission has already been granted.
In some extreme cases forged Land Registry documents have been produced to suggest that there is official Land Registry planning approval. In other cases a letter has been produced showing Land Registry estate plan approval.
‘Land Registry’s estate plan approval system is designed only to approve layout plans for development sites. The formal approved plan can then be used to form the basis of transfer or lease plans and facilitate registration but this is not planning permission for the site or plots,’ the guide says.
‘Land Registry plays no part in the process of granting planning permission for development. Often, those operating these schemes undertake to deal with the registration of the sales and provide the necessary documentation. In many cases those investing in such schemes are less likely to take independent advice,’ it adds.
This article was republished with permission from PropertyWire.