Friday, May 6, 2011

Speculating snake-oil spivs scuppered.

City watchdog takes land bank firms to court

The FSA has launched legal proceedings against six land-banking operations accused of duping investors into parting with £45m. The FSA says that people were persuaded to buy plots of land that they were told had development potential, but which in reality would never have been given planning permission. Examples included a site with no access, one on a 45-degree hill and another that was a site of special scientific interest. Jonathan Phelan, head of retail enforcement at the FSA, declined to comment on individual cases, but said: “Certain land banks are becoming more and more criminal in the way that they operate.”

Posted by sibley's b'stard child @ 10:46 AM (1961 views)
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11 thoughts on “Speculating snake-oil spivs scuppered.

  • Terrible spivery I’m sure but who are these people who are dumb enough to buy a plot of land without calling the planning department first? What kind of conveyancing solicitor doesn’t warn their client that the land has limited value? How does someone so stupid get their hands on enough cash to buy a plot outright (because a bank certainly wouldn’t lend on it)? I’m afraid I don’t have too much sympathy with these victims.

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  • Is this the same as speculating on the value of agricultural land? Knew someone who bought a field near Bath in the conviction agricultural land was the next bubble, this was 3-4 years ago, maybe 5. Person in question was also a bit of an amateur terribly lovely nightmarish middle-class landlord.

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  • fubar: I think you’ve hit the nail on the head. Many of these people though they’d wangle planning permission down the line a bit and they’d make a screaming fortune. It slowly occurred to them that the designations on this type of land (AONB etc) makes it impossible in their lifetimes, so they cry foul.

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  • sibley's b'stard child says:

    Tis true Flash, i’m not one to detract from taking the p*ss out of the participants.

    Speaking of which (i’m sure i’ve banged on about this before) a couple of friends of mine (and assorted family members) have bought a large plot of land in remote Turkey on the promise of planning permission turning it in to a nice a little earner (this time next year Rodders…).

    I tried to dissuade them but there’s no telling some people. All told, I think they forked-out 8k each to some goat-herder with a nod and a wink. Time will tell but i’m sure it’ll end in tears.

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  • sibs: Is it too late for me to put in my 8K? Goats are a very versatile animal

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  • sibley's b'stard child says:

    I imagine there’s a canny wheeze around the corner involving the similarity between the Turkish word for ‘goat’ and ‘arable land which will definitely get planning permission as my cousin says so’. Much hilarity will ensue (cue Benny Hill theme song). Still, i’m sure they’ll all laugh about it down the line.

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  • the number cruncher says:

    I have been involved in bidding wars to purchase land with some of these types of companies, working throw a disreputable local Land Agent. Some of them are actually legal, if not ethical, such as http://www.woodlands.co.uk and try to sell land to people looking for a plot as a ‘lifestyle choice’ I am sure you have all seen their signs by motorways across the country. I have not had direct dealings with the people behind Woodlands.co.uk but I have had a lot of dealings with with problems created by the people who buy land from the company and the ecological mess they make of woodlands. The company actually make their money from woodland trading, they buy plots low and sell them high to lifestylers, then buy them back at a low price when the lifestylers get board with owning it. They seam to be able to maintain a good monopoly on the small number of people who wish to buy and sell small plots of woodland in this way and so can charge a lot and buy back very low, the churn is where they get their super profits. Fantastic business model I am sure. I have seen a couple of competitors try to start up but they are not major players.

    A very big site near me called Seasalter Levels was purchased and sold as plots and its caused a right mess as the local council refuses to use compulsory purchase powers to take the plots back, but have spent millions trying to get them to voluntarily sell. All the owners think there onto a fortune with a seaside building plot if they only hold out long enough. I am involved with a big project on the site and the plot owners are the biggest obstacle to achieve the partnerships objectives, this has been going on for 15 years. I have been told that the same family that sold off Seasalter in plots are behind the woodland.co.uk company, farther and son apparently.

    The ones in the article sounds like the ‘boiler house’ variety that are looking for gullible(and greedy) souls to exploit and try to lure cash rich, often foreign, buyers. About 8 years ago I got involved with a TV documentary looking into this. I saw some of the brochures they used and the printed matter was very careful in its wording, but obviously the salesman’s patter was pure bullsh*t, promising this and that.

    Of course the solution to all of these problems is our old friend Land Value Tax. The perfect solution those seeking to profit from holding land speculatively.

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  • sibley's b'stard child says:

    Hi TNC, I hope you don’t think it too impertinent but as I defended your good name over t’other thread would you be kind enough to e-mail me a link to this presenting work you did for CBBC (you may remember I was impressed at the time, as per the Mr Bloom’s Nursery reference)?

    By the way, this is an anonymous e-mail that I only use for spam and company offers etc (although i’m happy to reciprocate accordingly):

    [email protected]

    If not, no problem.

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  • the number cruncher says:

    For those that want to look into this further visit http://www.propertyscam.org.uk The scale of the fraud is quite stunning when you do some research.

    Its a great site that lists all the scams, There has been a lot more ‘boiler room’ cold calling from the above companies and that seams to be why the FSA has stepped in.

    Interestingly this could be because we have reached the top of the Land bubble and these land banks are now desperate to offload their stock and options to their ‘marks’ before they start sliding in value.

    House prices crashes are of course really land price crashes as MW and others have explained so well.

    In the past few years I have twice tried to buy land, that the vendor wanter to sell to me, but with covenants that contained options by landbankers that the vendors had already sold. Because of my setup and funding sources I could not accept these restrictive covenants and the deals had to fall through, much to my annoyance. One (350 acres) had a restrictive covenant granting a landbanker permission to build an access road (through a an SSSI and NNR) to an area of farmland they wanted to sell. The other site (600 acres) had ransom strip options on the boarders with the local A road.

    [email protected] Hope you enjoyed those, Mums the word!

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  • the number cruncher says:

    Five Myths About Land Banking – From http://www.propertyscam.org.uk

    Myth #1 – Land is in short supply in England. Releasing land from special protection in green belt is the only answer. Therefore buying land in green belt locations is a good investment.

    The truth – Affordable homes are in short supply in England, often in rural or semi-rural areas. However, where new building takes place in these rural areas it almost invariably has one or more of the following characteristics: It is not affordable (suitable for a first time buyer). It is not generally built on green belt land, released for the purpose, but on previously developed land like old farm buildings (farm houses, barns etc).

    Myth #2 – The English green belt is under threat, shrinking and government policy regarding it will imminently change.

    The truth – There is more designated green belt land in the UK now than when the present government came to power in 1997. Government policy has not changed and it would require a change in primary legislation (the Town and Country Planning Act, the Planning and Compulsory Purchase Act et al) to effect any change. Neither the present government nor the opposition should they gain power in the future has any plans materially to change this legislation.

    There is a general presumption, enshrined in this legislation, against building in green belt locations and this can only be varied under very special and rare circumstances. Further, should a local authority refuse planning in a green belt location and the prospective developer decide to appeal, the appeal would fail at an early stage in virtually every case because of this general presumption against planning in the green belt.

    Myth #3 – A site comprising hundreds of plots owned by investors all over the world is as attractive to a prospective builder as a similar site owned by a single entity.

    The truth – Large developers in England all have their own substantial land banks sufficient for many years’ activity. These developers will not buy investment plot sites – they have no need to do so.

    Smaller developers, while lacking large land banks will generally try to find brownfield (previously developed) sites or negotiate the rezoning of a single piece of agricultural land and then buy that land in a single transaction from, say, a farmer. They will not buy a site comprising hundreds of plots with different owners because it is far too complex and expensive to negotiate individual sales of small plots, some owners will not be traceable, ownership in some cases will be disputed and some owners may attempt to hold developers to ransom by holding out for more money.

    If the arrangement with the land banking company includes contractual provisions intended to make onward sale of the whole site to a developer straightforward, for example by prohibiting plot owners from playing the ransom card, then this would be a collective investment requiring FSA authorisation in the UK. No land banker is currently authorised by the FSA to operate a collective investment scheme.

    Myth #4 – Land plots are a proven investment.

    The truth – there is no documented case of any land plot sold by a land banker ever gaining planning permission or being built on. Land banking has been going on in this country since c. 2000 and given promises by some land bankers of returns in a 5-10 year time frame, we should have seen some by now.

    Myth #5 – Land prices in England are growing at more than double the rate of the economy as a whole.

    The truth – Land with permitted development does grow in value at a healthy rate and it is this fact that land bankers generally latch onto, without revealing that they are actually talking about land which is either already developed or for which permission to develop exists.

    Agricultural land prices in England are stagnant or even shrinking. The peak was in the late 70s when agricultural land was worth up to £4,600 per acre. The typical value of a green belt field now is c. £2,300 per acre or half what it was 30 years ago. Plot sites sold by landbankers invariably fall into the latter category.

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  • sibley's b'stard child says:

    Yes, thank you TNC, I was right to defend your corner.

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