Land banking, the term often used to describe the practice of buying and selling plots of land with the intention of making a profit, is a legitimate practice, regularly used in the commercial property industry. However, the industry has been blighted in recent years by heavily publicised poor practices and scams. Every time a company is accused of putting profit before ethics it damages the commercial property sector as a whole.
There are many cases of people ending up with almost worthless pieces of land, having been promised high returns because planning permission was due imminently. However, once the money had exchanged hands, the buyer then finds that there is no prospect of this happening, often because the area is a designated green belt, or because it is subject to protection from planning law, or because they would have to wait far far longer than promised before planning permission may be granted.
In response, the government has updated its Land Registry Public Guide, which should be of interest to those seeking to acquire land for commercial property investment.
Originally published in 2008, the latest edition contains contact details for advisors on land banking schemes. The role of land banking regulatory bodies is examined and information on how to report suspected fraudulent activity is included. Attention is drawn to the Law Society’s online ‘Find a Solicitor’ service, where specialists in commercial property law and acquisitions can be found. Those seeking details for registered valuers of commercial property are signposted to the Royal Institution of Chartered Surveyors (RICS).
So far, up to £200 million of investor cash has been lost to land banking scammers, says the Financial Services Authority. The UK’s financial services watchdog has had some success in chasing and closing down dishonest land banking practitioners. However, others have moved operations abroad, to countries where the regulations are more lax.
Authorities in these countries do seem to be catching on to the problem though; in 2010, Singapore issued a warning, specifically highlighting the UK as a country where caution should be observed when entering into land banking agreements. Of course, this is good for stopping those who may have been conned from losing their shirts, but not so good for the legitimate side of the land business.
