Landbanking fraud

Recent public interest has been triggered by some cases of note in the media. A television programme depicted an elderly man in his 80s, having been conned out of a significant sum of money, when the land he purchased was not worth more than 1/5th of what was paid, with no realistic prospects of the

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Recent public interest has been triggered by some cases of note in the media. A television programme depicted an elderly man in his 80s, having been conned out of a significant sum of money, when the land he purchased was not worth more than 1/5th of what was paid, with no realistic prospects of the value of land ever increasing.

What is Landbanking? A Landbanking fraud scheme is one in which land is usually purchased with the intent of holding onto it until such time as it is profitable to sell to others for more than was initially paid. The value of land may increase upon the supposed exercise of an option to develop, planning permission, downgrading of greenbelt land to brownbelt land, or less, conversion for use as housing, and/or potential extraction of raw materials.

They can be found in a number of areas, but more particularly within sight of an already expanding and developing town, or regeneration development.

Is all Landbanking illegal?

No it is not. There are many genuine Companies set up for you to invest monies on speculation. If the speculation is worthy, and an independent value confirms the value of land, then all well and good: In such circumstances a landbanking scheme may well be legal because the information stacks up, and the returns are modest rather than proverbially ‘pie in the sky’.

Why are people attracted? In this age of uncertainty that we live in, people look for tangible assets. One always thinks that bricks and mortar will as a long-term investment substantially increase. Interest rates are not attractive to someone cash-rich who is dubious or uncertain to invest in other commodities such as stocks and shares. That person in such a position will perhaps take a risk on investment. Generally speaking, the younger the person investing, the more risk he/she is likely to take. Conversely, an older person, may not want such a high risk.

  • Attraction of fraudster to older victim:
  • The attraction is that older people are:
  • Volatile;
  • More likely to be hoarders of cash;

May be manipulated into parting with their life savings, justifying/rationalising it as not making any return sitting under the mattress, and being one-last flitter to make some bigger money as a legacy for their grown-up family;

More likely to be confused, or bamboozled into agreeing something under pressure, and a bombardment of telephone calls on the premise that the caller is ‘doing you a favour’.

How the Fraudsters work

This works in much the same way as a ‘boiler room fraud’. There will inevitably be a number of people involved in this scam. The more people supposedly in the loop, the more likely there is an attempt to lead you into a false sense of security by trusting and believing that the caller is genuinely trying to help you for the good of your family, and as a legacy to leave which is going to be substantially more than invested and a better rate of return than any Bank.

The way it works is based on your desire for a specific good or service. In this case, it is a commodity of land. You are being sold a dream. If it sounds too good to be true, then that is usually the case.

The initial caller seeks ‘You’ Psychology. They look for weak points in your story, and are fastidious in detail. You part supposedly honestly with your money to them, and you expect a huge return. In the m meantime, you have divulged the names of loved ones, that they can work on resolving.

The lack of supply in the market generally, and the possibility of you having something that others do not have, and making a profit, may be enough to spark a request. The main ingredient is the urgency to purchase land, and the pressure or boiler to buy now whilst ownership of Land appears not to be in dispute, or that someone else may take the deal instead, and unless you buy it up now, an opportunity to will be missed forever.

Possible people involved in the attempted landbanking fraud

Let me introduce you to some of the players in a Landbanking fraud scheme:

There will be the initial sales team which will consist of a ‘frontier’, a ‘closer’, and a ‘verifier’.

Then, there will be the next holiday rep, or perhaps the ‘Verifier’ who says that you have been miss-sold a LandBanking Scheme, but they will put things right for you. 2 to 3 weeks after the abortive transaction, you may become the owner of what is in reality a worthless piece of land, or alternatively a piece of land with no realistic options of being developed, or being worth considerably less than it actually is.

There is an urgency by taking immediate action, or else such offers to purchase for you, may not last and will go to someone else. You begin to trust them as an elderly person because after all, when did your grandchildren come to live with you, and you needed the company. The idea is to pressurise you to invest funds. Whilst under pressure, you become confused. You go along with what the ‘closer’ is saying because they have made the demand for landbanking irresistible not to snap up immediately, or else. Just before you think too much about it, the ‘Verifier’ will ask you some insignificant question, regurgitating perhaps your instructions, and things personal to you which play on your heart-strings, but assisting you only to lose track of your concern.

There may be a valuer, and perhaps a Solicitor in on the conspiracy to defraud you of funds. An Employee at your Bank may also be ‘in’ on the scam.

What to do if you feel you have been the victim of a Landbanking fraud scheme ?

The Financial Services Authority (‘FSA’) until recently, were short on resources, but over the past 2 years the Regulator has been cracking down on unlawful landbanking fraud schemes. The FSA has extensive rights in such circumstances which include private prosecution and/or Criminal Prosecution via the Serious Fraud Office, or bringing a Civil claim against that Company or individual/s.

Alternatively, if the Company is placed into Liquidation, a Liquidator can seek to recoup personally from Directors, and therefore lift the corporate veil of a Limited Company by way of a claw back up to 2 years.

A valuer, may be subject to regulatory breaches of the Royal Institute of Chartered Surveyors.

If a Solicitor has been involved fraudulently, you need to contact the Solicitors’ Regulation Authority. They will give you guidance on your next steps.

Last year some £60m of consumer money was recovered from landbanking fraud schemes by the FSA.

However, in most cases the regulator is unable to return money to customers.

The FSA could not put a figure on how many land banking schemes there are operating in the UK, but the UK land banking market is widely believed to be in the billions.

The sale of land is not regulated by the FSA. However, it is regulated when it is sold as a collective investment. Conducting land banking without being regulated is illegal.

Furthermore, because these business activities are unauthorised, victims of the scam are not covered by the Financial Services Compensation Scheme.

The shame of being conned, and possible options

According to the Association of Certified Fraud Examiners, (‘The ACFE’), 1 in every 20 people fall foul of a boiler room fraud, and 1 in every 100 never bother to report such a fraud.

Whatever way you have been conned, or however foolish you feel, my advice is that you should always report such a crime.

Go to your local Police Station and report the crime, or alternatively dial 101 for a non-Emergency and relay the events to them. Try and remember as much of the details as possible: the voice, the types of questions used, the times of calls, phone numbers if possible.

Also, report the matter to your local Trading Standards Officer. If enough people report such crimes, Trading Standards will launch an investigation. It is part of their duty to protect consumers.

If you used a credit or debit card to purchase such goods or services, and the value was more than £100, the Consumer Credit Act 1976 may apply, and the Bank may well reimburse you for the fraud.

If the Company proves to be insolvent, the Insolvency Act will apply. A Liquidator has powers to lift the corporate veil and pursue Directions by way of a claw back of monies up to 2 years beforehand.

You have other options in Civil Law to seek to lift the corporate veil of a limited company in order to pursue a Director of the same;

You can seek to obtain a Freezing Injunction freezing the funds and assets of the Company until further information is provided to you;

Professor Rosen is a Solicitor-Advocate, Partner and head of Litigation at Darlingtons Solicitors. He is a working member of the Fraud Advisory Panel, a Certified Fraud Examiner with the Association of Certified Fraud Examiners, and a visiting Associate Professor of Law at Brunel University specialising in criminal and civil fraud. For general advice on fraud and how we can help, click here.

David Rosen • Fraud

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