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The risks of investing in building plots

The Land Registry has recently issued a warning against buying so-called ‘building plots’ from fraudulent property dealers. Such dealers buy up undeveloped land and then split it into plots which they try to sell as having investment value, a practice known as land banking.

There is nothing to stop anyone selling plots in this way. Unfortunately, buyers are often misled into thinking that their plot already has planning consent, or has been approved for future development, when this is not the case.

One of the ways by which land dealers have misled buyers is to have their plot plans and transfer documents approved by the Land Registry. They then advertise this approval to potential buyers, who are led to believe that this amounts to government approval for development.

Rogue dealers suggest buyers don’t need a Conveyancing Solicitor

Conveyancing Solicitors asked to act for buyers will point out the risks, but rogue dealers often suggest that buyers do not need independent legal advice and can deal with them direct.

Such plots are invariably outside existing areas scheduled for development, and often in green belt land, so they have little or no development potential. Even if the land did become available for development, commercial developers generally want to buy substantial plots and are unlikely to be attracted to land which has been split into small plots with many owners.

These schemes are not illegal as such, but sellers may be committing fraud if they mislead buyers about planning consent or development potential. The Land Registry has stated that it cannot refuse to register plot transfers, and is not under any obligation to warn purchasers. It will, however, liaise and cooperate with regulatory and law enforcement bodies, including the FSA and the police with the aim of preventing any illegal activity connected with land banking.  

Buying land and property is inherently risky. As such, it is always recommended that you employ a good Conveyancing Solicitor to advise you. If their advice is “don’t touch this with a bargepole”, you will have avoided wasting money on a worthless investment.

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