Land banking investment schemes

Find out how schemes to invest in a plot of land work, how to tell whether it is a scam, and why the structure of the scheme matters.

Land banking companies divide land into smaller plots to sell it to investors on the basis that once it is available for development it will soar in value. However, the land is often in areas of natural beauty or historical interest, with little chance of it being built on.

The number of land banking schemes being reported to us has been rising as more people discover they have invested in a plot of land in a green belt, nature conservation, agricultural, brownfield or other protected areas.

Plots sold recently include one on a site of special scientific interest, one on a 45-degree slope and another without any access to it. Some plots are simply too small to build on.

We estimate land banking schemes have cost UK investors as much as £200m.

How land banking schemes work

The contact usually comes out of the blue, with most schemes cold-calling investors after taking their phone number from publicly available shareholder lists. But the high-pressure sales tactics can also come by email, post, word of mouth or at a seminar or exhibition.

Investors are told they will make big profits on small plots of land once planning permission is granted or development started.

But many plot-holders instead lose large sums of money as this permission is often not granted or even applied for, and they are left with a plot that is practically worthless.

While not all land banking schemes are a scam, it is often not made clear to investors that there are restrictions on the development of the land or that it is otherwise protected.

Where it is explained that planning permission still needs to be obtained, promoters of land banking schemes may offer to handle the application process. If this is the case we should be able to help, as explained below.

There are also follow-up scams where plot-holders are asked to pay more money to settle their holding once they realise they will never turn a profit. Find out more about reporting a scam

Protect yourself

Remember: if it sounds too good to be true, it probably is! 

If you are considering buying land currently subject to planning restrictions, we strongly recommend contacting the local council where the land is located and asking them whether the land might ever be released for development.

Just because the person promoting or operating the scheme says it is guaranteed the land will be developed does not necessarily mean it will be.

Remember if the company promoting or operating the scheme is not authorised by us, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

Beware that these schemes are usually set up as a simple real estate transaction and have small print stating that the success of the investment is subject to planning permission being granted, underlining that the chances of getting any money back are slim.

There are more steps you can take to keep your savings safe – find out how to protect yourself from investment scams.

Why the scheme structure matters

We do not regulate the sale of land. But we do regulate collective investment schemes (CIS) and a firm must be authorised by us to promote or operate them in the UK.

We can only take action over a land banking scheme when it is being promoted or operated as a CIS without our authorisation. The scheme may be a CIS where:

  1. investors do not have day-to-day control over managing their plot
  2. the scheme involves pooling investor funds
  3. the operator is responsible for managing the scheme as a whole

It is possible to sell plots of land without the scheme being a CIS. So, many land banking schemes are set up to avoid the characteristics of a CIS – at least on paper.

However, sales people may tell a different story and it helps us prove that a land banking scheme is a CIS if we know what you are told when it is being promoted.

If there is not enough evidence that a scheme is being run as a CIS but there are wider concerns, we can refer it to Trading Standards, the Corporate Complaints Team at the Department for Business Innovation & Skills (DBIS) or the police.