The practice of land banking is back in the news and, sadly for the majority of law-abiding commercial property organisations, for the wrong reasons.
Several firms have been found acting fraudulently, after Business Secretary Vince Cable presented petitions to the High Court to wind up their activities. The Finance Services Authority (FSA), the UK’s finance regulator, investigated the following organisations: Stowford Place Investments Ltd, ASA Global Investments Limited, Prinston Estates Limited, Alpha Capital Investments (London) Limited, Greenacre Global Partners Limited and Vinci Trading Ltd.
A total of £45m of fraudulent transactions were uncovered after the FSA authorised an inquiry by Company Investigations, part of the Insolvency Service, under Section 447 of the Companies Act 1985 (as amended). Among the discovered deals were the sale of a plot of land with no access, one on a near-45 degree slope and one of special scientific interest.
The Official Receiver has been appointed provisional liquidator by the court and is expected to investigate the companies’ previous activities in the commercial property markets. Any assets or monies from third-party commercial property businesses controlled or possessed by the six organisations will be protected.
The practice of selling land to investors is one that, when managed correctly, can result in positive returns for both clients and commercial property developers. Unfortunately, a few unscrupulous firms featured in the media can give the whole sector a bad name. This was made even worse when a recent television programme showed one prospective commercial property investor losing £100,000 to fraudsters. He was told the areas of land would generate returns of 100–130% in a year. Eventually he found out that the land was undevelopable and worth just £75. The FSA is currently investigating up to twenty such schemes, according to the BBC.
The full details are expected to be published on 29 June, when the petitions are listed for hearing.
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