What is land banking? Land banking companies buy a piece of land and subdivide it into smaller plots, which they sell on to individual investors at an inflated price. At the more dubious end of the market, firms cold-call potential investors, offering undeveloped, usually greenfield land for sale, with the promise of huge returns when planning permission for development is granted. Glossy marketing material quotes experts, politicians and studies extolling the need for affordable housing and urban redevelopment. Once you’ve invested, the company will try to lure you in further. Often the land is protected from development without planning permission under a blanket order known as an Article 4 Direction. In some cases, companies have been shown to produce false land registration certificates and investors end up not owning the land. It can be very difficult to differentiate between a real land banking scheme and an . Find out more about spotting a scam with our guide. Investors in Browne Mackenzie Limited and Lawrence Taylor & Co Which? was contacted by a member who had invested money in a land scheme with Browne Mackenzie Ltd (BM), hoping to earn a healthy return. Two years on, and with BM in liquidation, he still has not received any of his money back. City of London police have arrested four men involved with BM on suspicion of land banking fraud and money laundering. BM staff are believed to have cold-called potential investors about land in Northampton and Dumbarton. An associated company, Lawrence Taylor & Co, is also being investigated. So far police have identified 92 investors who have put around £3m into the Browne Mackenzie scheme. Police are keen for anyone who may have been contacted by BM to get in touch by email at firstname.lastname@example.org, by phone to Action Fraud on 0300 123 2040 or online at www.actionfraud.org.uk. Why Which? believes land banking can never work We believe the land banking model can never work. Dividing land into individually-owned plots makes it less likely to be built upon, as no developer would want to deal with hundreds of separate owners. And no one investor could go it alone and build on a plot without shared facilities such as access roads, sewerage and power. BM’s contract states that there is no guarantee ‘that the layout of the land or the access roads on the retained land will be as shown on the plan’. So you could end up with a piece of land that you cannot reach, never mind build on. To sell the land to developers, investors would have to group together, leading to the risk that one investor will ‘hold the others to ransom’, demanding a high price for the last strip. In the case of BM, the Which? member told us: ‘BM had already stated previously on the telephone that should they not find a buyer for the whole plot they would apply for planning permission themselves’. If the land investment company offers to manage the land on investors’ behalf, it would constitute a collective investment scheme which would require FSA registration. Most land banking firms do not have this, leaving investors with little protection if the company goes bust. How can I buy land? It is possible to make a speculative purchase of land, for example through an estate agent or at auction. However, returns are not guaranteed and maintenance costs may be prohibitively high. Rather than buying tracts of land, you could buy shares in an FSA-registered land company, or pool your money with other investors in an agricultural fund. Take independent financial advice to gain a level of protection under the Financial Ombudsman Service and the Financial Services Compensation Scheme – unavailable when buying direct. Even if an investment looks genuine, you should always check how it is regulated, particularly for overseas companies. The FSA publishes a non-exhaustive list of companies it suspects of contravening UK law. Visit the FSA website and search for ‘unauthorised overseas firms’. The FSA has also produced a video guide to land banking (you can watch it below). The Land Registry also publishes a handy guide to why you should be very wary when offered a land-banking investment opportunity.