Never Never Land
The Olympics and planning reforms are giving investors inflated hopes of making a quick buck. Sarah Stewart reports.
£20,000 later, I cannot even plant a tree on my land or put a fence around my plot, let alone develop. Development was the subtext of my investment.” These are the words of Tony Payne - not his real name - a 60-year-old - gardener from Gloucester and a victim of a landbanking
investment gone bad.
He is one of many people to have purchased plots of land marketed as having incredible profit potential, but which, when the transaction completes, delivers little more than regret by way of return.
Payne had a sizeable amount of money left to him in inheritance, some history of investment, but limited knowledge of development. He wanted to invest his money in a tangible asset such as land. Despite his frustration, the company he bought from denies any wrongdoing.
With the Olympic Games two weeks away, all eyes will be on London. An estimated 4 billion people will watch the games on TV, and 4 million extra people will visit the capital.
Now, it has emerged that some landbanking companies are not only using big profit promises as an incentive to invest in and around London, but are also using the Olympics as a method to attract overseas buyers into parting with their money.
The Financial Services Authority (FSA) has warned that a slew of landbanking scams could be just around the corner, as inventive companies take advantage of investor naivety and the media focus on the southeast to promote land which has little, if any, prospect of producing a return.
The same firm used by Payne uses the Olympic Games logo as a marketing tool, the use of which is prohibited, as the London Organising
Committee of the Olympic and Paralympic Games (LOCOG) says: “Only commercial partners, sponsors, suppliers and licencees are permitted to use it. You cannot use the Olympics logo or any emblem which purports to have an association with the games. It could lead to a damages claim, if the company is making financial gain from it.” Land banking is not illegal. In fact, it is regarded as good practice by companies
to buy up portions of land in areas where future development is anticipated.
For example, the land bank of Berkeley Homes exceeds £2.5bn. But while Berkeley conducts extensive research into the development
potential of the land it puts in its land bank, other companies are selling land to less savvy customers on the promise of planning
permission being granted at some point in the future. In fact, the chance of this being secured is low.
“Con men need an ‘in’,” says Jonathan Phelan, head of unauthorised businesses at the FSA, the body responsible for investigating claims
of land-banking scams. It seems the Olympics is just another opportunity for tricksters to seize. The threat of falling victim to scammers is increased by the confusion surrounding the changes to planning. The National Planning Policy Framework (NPPF) was introduced by chancellor George Osborne in March, and the issue of meeting housing targets, especially
in London and the south-east, is much discussed in the media.
“The public may hear a lot of discussion around planning [and the presumption in favour of sustainable development], and think that their chances of being granted planning permission are increased,” says Phelan.
“Likewise, they may hear on the news that there is a shortage of housing, and think that their chances of successfully developing the land they purchased are increased.”
In addition to making false promises about development potential, if the company organises, runs or promotes any sort of unregulated collective investment scheme, this could be an area for FSA investigation.
In March, the High Court ruled that three UK land-banking companies — James Kenneth Maynard, Countrywide Land Holdings Ltd (Countrywide) and Plateau Development & Land Ltd (Plateau) — should pay a fine of £33m to the FSA for operating collective investment schemes without authorisation. These companies have all been shut down, as the FSA closes in on fraudulent companies.
Such companies are easy to set up. You do not need a qualification to sell land, nor do you need to undergo training to call yourself an agent.
Individual contributors to online forums propertyscam.org.uk and boards.fool.co.uk raised complaints about a particular company called Gladwish Land Sales, which was the same company Tony Payne used to purchase his land. At the time Payne lived close to the offices of Gladwish Land, in West Sussex.
There is no suggestion that Gladwish is operating a collective investment scheme without authorisation, or that it is subject to any FSA investigation. The Ruscombe Valley Action Group was founded to raise concern about Gladwish Land selling land “obviously divided into house-size plots and marketed as being geographically closer to urban areas than the land actually was”.
The land in that instance was subject to a tree preservation order.
Gladwish Land also operates Perfect Plot, the Freehold English Land Agency and Meadowlandmoney.co.uk, offering the same services.
Posing as a potential customer with around £40,000 of inheritance money to spend, Property Week went under cover to investigate the claims put forward that the company promised things which it could not deliver.
Property Week was given access to marketing material “reserved for loyal traders”, which displayed an unofficial Olympics logo alongside plots of land for sale in the south-east.
When asking Gladwish Land whether the land we were interested in purchasing, in Cowden, Kent, could be developed on, Gladwish Land answered: “The government did announce several million houses will be built on agricultural land. Nobody knows where. If you can find a plot at a good price now, you shouldn’t have a problem getting your money back and more.”
Plots for sale in Cowden start at £2,800 for a plot measuring 8 x 10 x 8 x 10 metres, and the price is then negotiable above that sum for plots up to 118 x 47 x 158 x 22 metres.
The land in Cowden is hard to get to. It is situated in the middle of other fields and woodland without an access road. Some plots of land can only be accessed by crossing a locked gate and by walking over other plots. Payne says: “When I purchased the land and went to look at it, it was hard to work out where it even was.”
Peter Gladwish, managing director of the eponymous company, denies all the allegations. Gladwish Land Sales’ website states clearly: “We have nothing to do with land banking, collective investment or any other scam-related issues.”
Gladwish says: “In none of our literature do we promise land can be developed upon. In fact, recently, we started marketing plots as ideal for agricultural land, for allotments and to keep bees.
“Just because there is an Olympics logo on our material, does not mean that we are using it as a hook to entice investors. Just because we link to articles, which say the government will be releasing land for housing, does not mean that we are implying that the land we are selling could be too. That is for the customer to put together, we are just informing them of the wider picture.
“We do provide aerial shots of land divided into plots, which look like a housing estate, but equally, you could argue that it also looks
like an allotment [pictured, left].”
The material does stress that the sites can be used to grow “healthy, organic food”.
He continues: “I have no control over the Gladwish Land Facebook page, which has positive testimonials — I have nothing to do with that. The prices we affix to land and the future costs of it are based on the prices my late father put forward.”
While under cover, Gladwish Land told Property Week: “You do not need a solicitor, and that is an extra time and cost to you.”
Simon Ricketts, partner in SJ Berwin’s planning and environment group and UK head of real estate, says: “The onus is on the potential buyer
to be vigilant and to do their research. In some instances, purchasers are subtly warned off from using a solicitor.
“Alarm bells should be ringing in any transaction where prospective purchasers are discouraged from seeking legal advice.”
Gladwish responds: “I do not think that by saying no lawyers are needed for conveyancing, I am being irresponsible. People can make their own minds up.”
Lawyers say that property agents in particular have to be more vigilant and responsible when investors ask for their advice, and greater regulations have to be introduced over those people who call themselves agents, which, at the moment, anyone can do.
Ricketts adds: “Another indicator may be the way in which some companies adopt a worryingly casual attitude to the acquisition or disposal of land, which will no doubt lead to practical and conveyancing difficulties in years to come. Purchasers could be buying into all sorts of problems.”
Ricketts criticised the Land Registry for allowing the exchange of land to happen with too few questions asked. However, a spokeswoman says: “We are required to register land. This is the role that we play. Regulating, checking and asking questions are not within our remit, but we do work to raise people’s awareness to the threat of land-banking scams.”
This comes too late for Payne, who still maintains that future development was the subtext of his investment.
“When I eventually planted fruit trees on my land, a day later, they were uprooted. The police said it was probably bored teenagers, but this happened a few times, and when it keeps happening and you know that there is ‘nimby’ sentiment out there, you do wonder.”
Land-bank buyers: who are the losers?
In April, the Financial Services Authority contacted 76,000 people who were thought to be the targets of land-banking scammers.
Jonathan Phelan, FSA head of unregulated business, describes the average investor who falls prey to land-banking scams.
“The targets are usually men. Being savvy about investments does not make you immune. More often than not, the potential investors have some investment experience, maybe having put money in stocks and shares before.
“The fraudulent operators are growing increasingly savvy to tailor their behaviour to fit the investor’s expectations. They may sound like an investment adviser and use the same jargon to sound credible. It is a wonderful thing that a person’s natural inclination is to trust -however, this is a characteristic that some scammers prey on.”