How I was targeted by a property scammer

Tony Levene explains how the scam widely known as 'land banking' actually works in practice.

If you're registered on lovemoney.com, you can follow this blog and find new posts as soon as they are published, via your personal homepage.

This week, a gentleman by the name of Charles has been very eager to contact me. He has phoned me several times from a withheld number, and has posted a glossy brochure.

He tells me he is a broker for a firm that specialises in land. He informs me it owns over 20 sites which have development potential.

But he wants to concentrate upon – and put my savings into – land in Dumbarton, a town some 15 miles to the west of Glasgow.

Charles says the Commonwealth Games in Glasgow in 2014 will transform property prospects in Dumbarton. I know little about the town but, oddly, the firm's material says it is “Scotland's primary centre of business and industry” and “one of the top 20 business centres in Europe” . Wrong and obviously confused with Glasgow, but flattering to Dumbarton's 21,000 citizens.

The material also quotes 2007 property price rises – true at the time but now ancient history.

Show me the money

Back to Charles – I use his first name as he always calls me Anthony. He wants me to invest between £3,000 and £10,000 into Dumbarton land without planning permission. At £5 a square foot, according to a valuation prepared by the firm's surveyor, that works out at about £220,000 an acre, substantially more than the £100,000 an acre that landbankers usually try to get for sites without a planning go-ahead. Charles says he is not sure how the valuation is calculated as he's a “broker” but, when pushed, he says it is based on testing the soil among other criteria. If I buy, I am assured I will receive a title document.

Related blog post

• Tony Levene writes:

  My phonecall from a scammer

  Find out what happened when Tony Levene got a phonecall from a scammer....

  Read this post

But what about the exit strategy? Charles assures me the land will be sold in 12 to 14 months to a developer at a profit. This will not require planning permission. He even suggests it might be sold this week as several developers have shown interest. If this does not work, however, his firm will develop it (despite having no track record). This option would, of course, require planning permission.

I will have to sell my parcel of land along with all the other investors to prevent any one disposing of land at a different price to the rest.

Now, when someone sells land to several investors on the basis of managing it and then disposing of it as one plot, it falls under the Financial Services Authority's collective investment rules. And only authorised persons or firms can sell collective investments.

Charles states that the FSA does not govern land sales (true). But when pressed on the collective investment, he says: “It does not come under the FSA because we don't deal with the FSA.” The FSA does not agree with this odd argument and has put this firm on its warning list of unauthorised firms.

A toddler director?

This is not the first Charles to contact me from this firm. I also received information in May from another Charles with a different surname – but oddly both letters from both Charles are identically signed.

The Charles I spoke to stated that while the firm has only been around for a few years (true), the directors have “always been in property for 25 years.”

The only director shown in the Companies House listing is a 27 year-old, so he must have been in property since he was a toddler.

The firm was formed in September 2007. It has yet to file accounts due on July 19, 2009. Nor has it filed the annual return to Companies House due on October 17, 2009. Both these failures are criminal offences under the Companies Act.

I shall not be buying land from this company – in Dumbarton or anywhere else.

Read more posts on this blog: My phonecall from a scammer | Nine things you need to know about scams

Find out more about Tony and the Scam Magnet blog in our video!