IN JANUARY 2006, I flagged up the emergence of a new industry which was about to become a financial scandal.

Tipped off by a reader to investigate land banking, I was concerned by promises being made by bogus property investment companies.

At the time I wrote: "Spiralling property prices have begun to spawn a new rip-off industry.

"One scam is the sale of small plots of agricultural land which, the sales companies claim, may get planning permission and increase in value by up to 300 per cent.

"The websites look professional and include reports from august bodies talking about the increase in land values. But what they don't say is that many of the plots of land are overpriced, in remote areas with no services and will never qualify for planning permission."

Two years later, the extent of this fraud is beginning to emerge. The financial regulator, the Financial Services Authority (FSA), recently asked the High Court to wind up the UK's largest landbanking company - UKLI Limited.

(Via the Scottish Daily Record. To read the full story, click here)

Britain's financial services watchdog is looking to shut down UK Land Investments (UKLI), the country's largest "landbanking" company, which has been the subject of Guardian Money warnings.

This will leave 4,500 investors with slices of virtually worthless farmland. It now appears that many might have avoided losses if the Financial Services Authority had listened to fraud squad requests to shut it down in 2005.

The FSA will ask the high court to wind up UKLI for operating as an illegal "collective investment scheme", thereby denying investors protection. The FSA says investors poured £69m into the firm, which sold small plots of "selected" farm land, claiming it could get planning permission for housing so the site would soar in value.

Investors are unlikely to get anything back from the liquidation as almost all the cash was soaked up in commissions and payments to directors and shareholders. But Guardian Money can reveal that fraud specialists at the City of London police were convinced UKLI was operating against the public interest when it first probed the Mayfair-based firm three years ago.

(Via The Guardian. To read the full story, click here)

Leeds MP, Greg Mulholland, has expressed his delight that the FSA has called upon the High Court to wind up the UK’s largest land investment company UK Land Investments, after Mr Mulholland wrote to them to highlight serious financial irregularities in the way in which UKLI conducted business. 

Mr Mulholland wrote to the FSA back in May of last year, after UKLI’s Charted Accountants Moore Stephens resigned citing a number of suspect practices, including the ‘loaning’ of huge sums of money to affiliates of the UKLI, principally the former Director of the company Mr Bally Chohan, and subsidiary companies operating at a considerable loss.

Commenting Mr Mulholland said:

“I am delighted that the FSA is taking action to bring the dodgy dealings of UKLI to an end.

“As I raised with the FSA back in May of last year, there were a whole array of serious financial irregularities in the way in which UKLI was conducting its business.

“It has taken some time but finally UKLI will not be able to take any more money from unsuspecting investors, many of whom put their life savings into these types of scheme in the hope of a substantial return which never materialises.

“However, the problem of land banking does not stop with UKLI, the whole industry should come under much closer financial scrutiny.”

(Via Liberal Democrat press release)
(See also: Greg Mulholland writes to UKLI; 3 December 2006)

Update: Listen to Mr Mulholland on BBC Moneybox, broadcast 7 June 2008.

The Financial Services Authority (FSA) has asked the High Court to wind up the UK’s largest 'landbanking' company, UKLI Limited (UKLI), for operating as an illegal ‘collective investment scheme’ (CIS) and denying its investors protection for their money.

UKLI advertised and sold plots of land to people by claiming that it could get planning permission for the land, which would increase in value and make investors a large profit once it was sold to a developer.  As a result, about 4,500 investors paid UKLI £69 million to buy the land.  None of the land sold was ever granted planning permission.

(Via FSA press release. To read the full story, click here)

An illegal landbanking scheme which sold plots of land to investors with the promise of big profits has had its assets frozen following action by the City watchdog.

UKLI Ltd bought up large chunks of land and divided them into small plots, which it sold on to investors.

Around 4,500 investors paid the firm £69m for 5,000 plots, which it claimed it could get planning permission for. These could then be sold on to a developer at a profit.

But none of the land was ever granted planning permission, leaving the investors with plots that were virtually worthless.

(Via The Guardian. To read the full story, click here)

An FSA spokeswoman confirmed that operating an illegal investment scheme would be covered under criminal offences in the UK but declined to comment on whether any criminal investigations or charges had been made in relation to UKLI.

(Via The Times Online. To read the full story, click here)

The Administrators of UKLI have posted on the UKLI home page a useful and informative summary of the situation regarding UKLI, the rights of plot owners and the options open to them.

Unfortunately, this summary is posted on the UKLI web site as an image and without alternate text and is thus not fully accessible. We have therefore decided to reproduce it as text and in full here.

Lee Manning and Carlton Siddle of Deloitte were appointed as Joint Administrators of UKLI Limited (the Company) on 22 April 2008.

UKLI was involved in ‘landbanking’, the purchase of large areas of undeveloped land which were then subdivided into plots and sold on to private investors, with UKLI retaining some of the land itself. UKLI would then seek to gain planning permission on the sites although, to date, planning permission has not been obtained on any site.

The circumstances leading to the Administration followed a petition to wind the Company up by the Financial Services Authority (“FSA”), on the grounds of public interest as UKLI had operated as a collective investment scheme without FSA authorisation.

(Via creditman.biz. To read the full story, click here)