By Katie-Jill Rowland
Over the last two weeks, the details of numerous scam property investment companies have emerged.
The firms in question were involved in dubious fractional investment schemes, as well as land banking schemes, where investors were conned into thinking that their ‘green belt’ plots had a good chance of being granted planning permission.
The FSA has the authority to regulate some of these firms, but it seems that many act in areas beyond its jurisdiction.
Last week 25 victims – who collectively lost in excess of £288,000 to a group of five linked property investment companies – saw the Insolvency Service force their perpetrators into liquidation.
Property Legal Services (London) Limited, Property Legal Services (2007) Limited, Overseas Legal Services Ltd, Enjoy Property Ltd and United Holdings & Investment Limited were all ordered into liquidation in the High Court following a Government investigation.
Yet for the victims of many other scam property schemes, justice may not so easy to find.
A number of B&C readers, who do not wish to be name, are only now beginning to suspect that they may have been conned by the land investment companies which they have worked with for over six years.
One such company, Sustainable Land plc (SL), has not faced penalties or been forced into liquidation, however investors are questioning its legitimacy.
One couple, who we shall refer to as Mr and Mrs Smith, were approached by SL in 2004.
Mr Smith was working as an IFA at the time, and was keen to expand his area of work into the property sector.
SL organised a meeting with the Smiths, along with other investors, where they explained the potential profits which investors and IFAs could realise through the land investments.
Mr Smith was impressed with the firm’s initial proposition and was keen to become an agent, having been told that he could make significant commissions through each client introduced. Furthermore, he was confident that he could offer his clients a sound investment, as SL told him that they would apply for planning permission immediately which would undoubtedly increase the plots’ values.
Mrs Smith said: “Everything seemed perfect and we were ready to become agents, but SL said that in order to do so we needed to buy a plot of land for ourselves.”
This ‘clause’ worried the Smiths, as Mrs Smith was aware that she was just about to lose her job.
She explained her position to SL who reassured her, saying that the commission raised from the introductions which they would make would easily cover the monthly repayments for their own plot.
The couple were persuaded, and soon signed the contract before introducing the investment opportunity to a number of clients, who became successful investors for SL.
Having been told that the commission for the introductions would be ‘on drip’, and that the company would use a portion of the commission to pay for their own plot, the couple went on with their daily lives.
A few years later, SL contacted the Smiths to say that they owed over £30,000 for their
own plot. According to the firm, small print in the contract stipulated that the Smiths were obliged to introduce £100,000 worth of business within one year in order to meet the terms.
Since they had not done so, they could not be agents and would have to pay for their land.
Shocked and upset, Mrs Smith explained that she could not pay this lump sum.
“When I queried the amount,” said Mrs Smith, “SL offered to buy back my land for £1500. This was a ridiculous offer considering the fact that we had put down a £5000 deposit for the plot and covered numerous subsequent installments.”
The Smiths hired solicitors to assist them. They have now been offered a more reasonable buy-back price from SL and despite the fact that they have clearly made a loss on their investments and had to pay legal fees, they are happy to be free from the company.
After hearing this tale, we were curious as to whether SL’s actions were illegal or non-compliant and if so, who could stop them conning others.
Sadly though, the FSA’s powers limit its ability to stop many land scam companies.
A spokesperson from the FSA said: “The FSA does not have the power to intervene in the sale and acquisition of land unless it crosses into unauthorised business i.e. a collective investment scheme where the seller promises to manage the land and apply for planning permission on behalf of the plot owners.”
“Many land banks are careful not to describe their operation as a collective investment scheme in their promotional material, so we cannot prove they are running these schemes without the help of investors.
“That is why we ask anybody who has dealt with a land bank to contact us. The information we get can help us protect hundreds, if not thousands, of potential investors.”
The Company Investigations Supervisor of the Insolvency Service, Chris Mayhew, explained that the Insolvency Service had “strong enforcement powers” over complicated and unscrupulous property schemes.
However, in order for action to be taken by any such body, the victims must come forward and report their experiences.
SL have not yet responded to our queries over their business practices, and therefore we remain unsure whether this company and indeed many others like it, are breaking the law through their ‘dubious’ schemes.