land selling companies - what's the catch?
Discussion
We recently had a land selling company phone us up and instead of doing the usual reaction to tele-sales calls I decided to quiz them about it further.
Basically they offer some land for sale up and down the country that currently does not have building permission on it, but the tele-sales company inform us that they only offer land that is highly likely to gain planning permission in the near future due to property development people looking to build on their sites. (They also used the term re-zoning...something to do with green belt areas I think).
It comes down to them offering plots of land for £10,000 each and if this particular plot gains planning permission then it will be worth more when selling…..ie. in the region of £50,000.
If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
Obviously there lies the risk in the ‘investment’…. .but I’m guessing there is more unforeseen risk with all this carry on.
The land buying company obviously have already bought the land based on their research of potential development areas etc. They then, for some reason, want to sell this land to people who can make a profit if it gets planning permission. Why does this company not wait and sell the land on its own and then take the profit themselves?
Anybody else had dealings with these type of companies?
Basically they offer some land for sale up and down the country that currently does not have building permission on it, but the tele-sales company inform us that they only offer land that is highly likely to gain planning permission in the near future due to property development people looking to build on their sites. (They also used the term re-zoning...something to do with green belt areas I think).
It comes down to them offering plots of land for £10,000 each and if this particular plot gains planning permission then it will be worth more when selling…..ie. in the region of £50,000.
If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
Obviously there lies the risk in the ‘investment’…. .but I’m guessing there is more unforeseen risk with all this carry on.
The land buying company obviously have already bought the land based on their research of potential development areas etc. They then, for some reason, want to sell this land to people who can make a profit if it gets planning permission. Why does this company not wait and sell the land on its own and then take the profit themselves?
Anybody else had dealings with these type of companies?
AJI said:
We recently had a land selling company phone us up and instead of doing the usual reaction to tele-sales calls I decided to quiz them about it further.
Basically they offer some land for sale up and down the country that currently does not have building permission on it, but the tele-sales company inform us that they only offer land that is highly likely to gain planning permission in the near future due to property development people looking to build on their sites. (They also used the term re-zoning...something to do with green belt areas I think).
It comes down to them offering plots of land for £10,000 each and if this particular plot gains planning permission then it will be worth more when selling…..ie. in the region of £50,000.
If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
Obviously there lies the risk in the ‘investment’…. .but I’m guessing there is more unforeseen risk with all this carry on.
The land buying company obviously have already bought the land based on their research of potential development areas etc. They then, for some reason, want to sell this land to people who can make a profit if it gets planning permission. Why does this company not wait and sell the land on its own and then take the profit themselves?
Anybody else had dealings with these type of companies?
I would guess that the plan falls over at the two points bolded above, i.e. the land almost certainly won't get planning permission, and they won't buy it back thereafter (or at least not for the amount suggested)Basically they offer some land for sale up and down the country that currently does not have building permission on it, but the tele-sales company inform us that they only offer land that is highly likely to gain planning permission in the near future due to property development people looking to build on their sites. (They also used the term re-zoning...something to do with green belt areas I think).
It comes down to them offering plots of land for £10,000 each and if this particular plot gains planning permission then it will be worth more when selling…..ie. in the region of £50,000.
If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
Obviously there lies the risk in the ‘investment’…. .but I’m guessing there is more unforeseen risk with all this carry on.
The land buying company obviously have already bought the land based on their research of potential development areas etc. They then, for some reason, want to sell this land to people who can make a profit if it gets planning permission. Why does this company not wait and sell the land on its own and then take the profit themselves?
Anybody else had dealings with these type of companies?
I was asked to comment on one of these recently in a professional capacity. Below was my response, slightly edited and with names removed to protect the inncocent, avoid naming & shaming etc
djmck30 said:
There are a number of companies offering similar "strategic land investment" opportunities - e.g xxxxxxxxxxx. All of these entail investors purchasing small, house-sized, plots of land on greenfield/greenbelt land which is then sold for a profit when the land is re-zoned from agricultural to development use and subsequently receives planning permission.
The success or otherwise of these investments would seem to be very much down to the ability of Xxxxxxxxx to successfully identify areas of land likely to be re-zoned/developed. There is nothing in Xxxxxxxx's literature to indicate any track record of success in this area, which is something I would query.
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
As with any planning issue, local politics is also likely to be a significant factor. There is some evidence of resistance to these types of investment from local planning departments - see this document: http://www.communities.gov.uk/documents/planningan...
You should also consider the issue of liquidity - although investors would own the freehold to their particular plot and are free to sell at any time, this would depend on finding an interested buyer for what is, in effect, a small plot in the middle of a large field! Xxxxxxx indicate that they will provide assistance in finding a buyer, but we have no indication as to whether there is a viable secondary market for these plots.
Finally, we would question whether a potential developer would find a site comprising hundreds of plots with different owners attractive. Negotiating a great number of individual sales of small plots could cost a potential developer a great deal of time and money. In addition, some owners may not be traceable, ownership in some cases will be disputed and some owners may attempt to "hold developers to ransom" by holding out for more money.
I should point out that this is a non FSA-regulated investment (much in the same way as investing in a property).
In conclusion:
Given the questionable liquidity and the potential for significant losses I would classify this as a speculative investment and would therefore suggest not investing any money which you could not afford to lose. I refer to the attached document from the Land Registry [Public Guide 21: Land banking schemes – buying land in England and Wales claimed or thought to have development potential] , which takes a dim view of this type of investment scheme. Although there is nothing to indicate that Xxxxxxxx have engaged in any of the more shady practices described, it is certainly of the opinion that these schemes are most profitable for those selling the investment.
The success or otherwise of these investments would seem to be very much down to the ability of Xxxxxxxxx to successfully identify areas of land likely to be re-zoned/developed. There is nothing in Xxxxxxxx's literature to indicate any track record of success in this area, which is something I would query.
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
As with any planning issue, local politics is also likely to be a significant factor. There is some evidence of resistance to these types of investment from local planning departments - see this document: http://www.communities.gov.uk/documents/planningan...
You should also consider the issue of liquidity - although investors would own the freehold to their particular plot and are free to sell at any time, this would depend on finding an interested buyer for what is, in effect, a small plot in the middle of a large field! Xxxxxxx indicate that they will provide assistance in finding a buyer, but we have no indication as to whether there is a viable secondary market for these plots.
Finally, we would question whether a potential developer would find a site comprising hundreds of plots with different owners attractive. Negotiating a great number of individual sales of small plots could cost a potential developer a great deal of time and money. In addition, some owners may not be traceable, ownership in some cases will be disputed and some owners may attempt to "hold developers to ransom" by holding out for more money.
I should point out that this is a non FSA-regulated investment (much in the same way as investing in a property).
In conclusion:
Given the questionable liquidity and the potential for significant losses I would classify this as a speculative investment and would therefore suggest not investing any money which you could not afford to lose. I refer to the attached document from the Land Registry [Public Guide 21: Land banking schemes – buying land in England and Wales claimed or thought to have development potential] , which takes a dim view of this type of investment scheme. Although there is nothing to indicate that Xxxxxxxx have engaged in any of the more shady practices described, it is certainly of the opinion that these schemes are most profitable for those selling the investment.
djmck30 said:
djmck30 said:
......
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
AJI said:
It comes down to them offering plots of land for £10,000 each and if this particular plot gains planning permission then it will be worth more when selling…..ie. in the region of £50,000.
If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
1. buy a load of land with zero-chance of PP and sell at cost If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
2. tell gullible punters PP failed
3. make 10%
ooo where do I sign?
Adam B said:
AJI said:
It comes down to them offering plots of land for £10,000 each and if this particular plot gains planning permission then it will be worth more when selling…..ie. in the region of £50,000.
If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
1. buy a load of land with zero-chance of PP and sell at cost If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
2. tell gullible punters PP failed
3. make 10%
ooo where do I sign?
1. buy a load of land with zero-chance of PP and sell at cost
2. tell gullible punters PP failed & then wind up the company
3. make 100%
chris.mapey said:
Adam B said:
AJI said:
It comes down to them offering plots of land for £10,000 each and if this particular plot gains planning permission then it will be worth more when selling…..ie. in the region of £50,000.
If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
1. buy a load of land with zero-chance of PP and sell at cost If however the plot does not gain planning permission then you can sell the land back to the company (who take a 10% commission charge).
2. tell gullible punters PP failed
3. make 10%
ooo where do I sign?
1. buy a load of land with zero-chance of PP and sell at cost
2. tell gullible punters PP failed & then wind up the company
3. make 100%
1. buy a load of land with zero-chance of PP and sell the same plot of land to many, many gullible punters
2. tell gullible punters PP failed & then wind up the company
3. buy your own island in the sun
t and for causing the fields they overlook to be carved up into little plots with white tape.monthefish said:
djmck30 said:
djmck30 said:
......
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
Edited by djmck30 on Thursday 9th July 15:22
djmck30 said:
monthefish said:
djmck30 said:
djmck30 said:
......
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
Xxxxxxx are not permitted under the Financial Services and Markets Act 2000 to seek planning consent on investor's behalf once the plots have been sold. Although there are hints at links with developers in their literature, it is not clear exactly what route is used to pursue planning permission once the site is fully sold and whether this is an active or passive process - this is something else I would prefer greater clarification of.
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