You see an advertisement, information at an exhibition stand or receive a phone call offering you a 'great investment opportunity' - a small plot of farmland. The plot will probably be located where house prices are high, near a town or a city. The pitch is that once planning permission is granted, you will be able to sell your land to a housing developer and make a profit.
This activity is known as landbanking. The promises of unscrupulous landbanking operators can turn out to be false.
The operators use misleading advertising and high pressure techniques to persuade you to buy agricultural land at vastly inflated prices. Don't be fooled by the glossy brochures. They will promise that planning permission is virtually guaranteed, and that the value is bound to rise.
Beware, in reality the land may be unsuitable for development, and little or no hope of getting planning permission. The true value of the land may only be a fraction of what you are told it is worth. The land often ends up abandoned and neglected.
Question any claims that your investment will make money.
Investigate the company fully.
Take independent professional advice about the status of the land and it's future development potential.
Ask the authority how likely it is that planning permission will be granted.
Some landbanking schemes may be considered in law as 'collective investment schemes' and so may need to be authorised by the Financial Services Authority. Contact the FSA consumer helpline on 0845 606 1234 for advice.
Further online advice is available from:
- Consumer Direct
- Be Aware, Beat Fraud - A Guide to Fraud Prevention information leaflet
- Financial Services Authority