British firms urged to avoid illegal landbanking schemes

UK firms investing in landbanking schemes are putting themselves at risk of potentially needing insolvency advice, with the number of unscrupulous companies operating in the sector on the rise.

According to the Insolvency Service, investors in such initiatives have lost more than £30 million since 2007 and this number could be set to grow.

The government body noted that it has closed down 49 such operations in England and Wales over the past four years.

It seems there are a growing number of illegal businesses trading plots of green or brown belt land, with 39 of those wound up occurring since 2009 at a cost of £13.4 million to their investors.

The practice involves the firm in question buying green or brown belt land, which is then sub-divided into a number of smaller plots that are then sold on.

However, investors often find that these plots have no chance of ever having planning permission granted, even though the landbankers regularly claim otherwise.

The Insolvency Service reports that there has been a 33 per cent rise in the number of complaints it has received against landbank rogue traders and a 100 per cent increase in the number of complaints about scams accepted for investigation over the past two years.

This could illustrate how firms investing in what they believe to be land with legitimate permissions could end up seriously out of pocket and struggling to avoid a winding up order themselves.

Insolvency Service head of investigations Robert Burns explained that it is essential to warn Brits of the unscrupulous actions of some land traders.

"We need to alert people to the warning signs and the fact that if a scheme seems 'too good to be true', that's usually because it is," he said.

"The public needs to be aware that land sold in these schemes is nearly always sold without planning permission and promises that planning is likely or in place, is a tell-tale warning signal."

He urged anyone considering investing to check first with their local council to see if planning permission is a possibility.

Meanwhile, advertising firms could soon be in need of bankruptcy advice if the 40 per cent of respondents who told the Institute of Practitioners in Advertising and Bellwether that the industry is set to get tougher are to be believed.