Find out how land banking investments work, how to avoid scams and what to do if you are scammed.
Land banking companies divide land into smaller plots to sell to investors, with the expectation it will soar in value once it’s available for development.
However, the land is often in areas of natural beauty or historical interest, with little chance of it being built on.
We are aware that scammers are targeting consumers searching for investments online, in particular through search engines like Google and Bing. Although some scammers offer high returns to tempt you into investing, they may also offer realistic returns to make their offer appear more legitimate. Those offering or promoting products or investment opportunities found through search engines are not necessarily authorised or regulated by the FCA. You can check the FCA Warning List for firms to avoid.
How land banking scams work
Investors are usually called out of the blue, but contact 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 permission is often not granted or even applied for, and investors are left with land 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 protected.
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.
How to protect yourself
Land investments are not regulated by the FCA.
If you’re considering buying land, we strongly recommend contacting the local council where the land is located and asking them when the land will be released for development.
Just because the person promoting or operating the scheme says it’s guaranteed the land will be developed does not necessarily mean it will be.
These schemes usually have small print stating that the success of the investment is subject to planning permission being granted – so you’re unlikely to get any of your money back.
Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.
You should seriously consider seeking financial advice or guidance before investing. You should make sure that any firm you deal with is regulated by us and never take investment advice from the company that contacted you, as this may be part of the scam.
Read more about how to find an adviser.
If the scheme is a collective investment scheme
While we don’t regulate the sale of land, we do regulate collective investment schemes (CIS) – and a firm must be authorised by us to promote or operate a CIS 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.
It is possible to sell plots of land without the scheme being a CIS, so many land banking schemes are set up to avoid looking like a CIS – at least on paper.
Determining whether a scheme is a CIS is often a complex legal matter. Broadly speaking, the characteristics of a CIS include:
- investors don’t have day-to-day control over managing their plot
- the scheme involves pooling investor funds
- the operator is responsible for managing the scheme as a whole
In these cases, we may be able to refer it to Trading Standards, the Corporate Complaints Team at the Department for Business, Energy, Industrial Strategy (BEIS) or the police.
If you have been scammed
Because land is not regulated by the FCA, your investment is not protected by the UK’s Financial Services Complaints and Compensation Scheme.
If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.
The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.
If you have any concerns at all about a potential scam, contact us immediately.