A Land Registry warning about land banking schemes.
Q: What are land banking schemes?
A: This is where someone buys a large area of undeveloped land and divides it up into smaller plots to sell on to investors. The schemes claim that the plots have good investment value in the expectation of future development.
Q: What are the risks?
A: There are risks associated with buying a land banking plot. Often the land has no prospect of ever being developed. Even if the land may be suitable for future development, the division of the land into many small plots held by different owners makes it less attractive for a company to buy it for development purposes. Some land banking scheme operators make claims which may be misleading and possibly fraudulent to attract investors. A number of land banking schemes have been closed down and their operators prosecuted.
Q: Is land banking regulated?
A: No, usually not. But there are some circumstances in which the Financial Services Authority, the police and other authorities can take action if investors have been misled. For more information, please see our Public Guide 21.
Q: Why doesn’t Land Registry refuse to register these plots?
A: We are legally bound under legislation to register purchases of plots within land banking schemes if all of the necessary legal formalities have been met. In most cases, someone buying a plot in a land banking scheme will acquire a valid legal title even though they may have been misled about the value of that title.
Q: Does Land Registry endorse any land banking schemes?
A: No. We take steps to ensure that land banking scheme operators do not gain credibility by claiming to have a link or special relationship with Land Registry. Also, we ensure that our procedures, products and services do not give the impression that Land Registry endorses or in any way approves of the possibility of development within a land banking scheme.
Q: Does Land Registry give planning approval?
No. However, in some cases scheme operators have produced a letter to prospective purchasers showing Land Registry has approved a plan of the estate which could be mistakenly interpreted as our approval of the scheme. Since September 2012, our policy has been to decline any request that we approve an estate plan, or draft estate documents such as transfers and leases, in suspected land banking schemes if we consider that granting approval may mislead members of the public into believing that future development is likely.
Where plans are approved, these may be used in the transfer or lease document but such approval is not planning permission. Land Registry has no involvement with granting planning permission for development.
Q: What else is Land Registry doing about land banking schemes?
A: We try to promote public awareness of land banking and the risks involved. See our Public Guide 21. Also, we liaise and co-operate with appropriate regulatory and law enforcement bodies with the aim of preventing any illegal activity connected with land banking and share information relating to known or suspected land banking schemes with such bodies. These include the Financial Services Authority, the Insolvency Service and the police.