Landbanking flop ends field of dreams

Landbanking flop ends field of dreams

One of Britain's biggest landbankers has gone bust, leaving investors who paid a total of £7m for tiny slices of farmland, wondering where their money went. Land Heritage (UK) Ltd told 700 land purchasers this week it was going into liquidation on the "advice" of accountants PricewaterhouseCoopers (PWC).

It told them to direct future correspondence towards PWC. But when Guardian Money contacted the accountancy firm, it said it had never heard of Land Heritage (UK) Ltd.

"Whatever LHUK says, we have not been instructed by this company and will not be. We have not provided any formal advice and we have not billed the company for anything. We shall not be handling any liquidation - we have no relationship whatsoever with it," PWC says.

Whoever acts as liquidator, the end of LHUK destroys what slim hopes investors had of the firm turning their minuscule plots into potentially valuable housebuilding sites - or of getting any refund.

"I fully expected 20% annual returns over the next decade - multiplying my money up to eight times. I know that's a lot but I did not go into this investment with my eyes closed," says one Kent investor who asked for anonymity.

Now all he has is title to a plot of land in the middle of a field which is unlikely ever to gain planning permission.

LHUK set up in November 2004. It started landbanking in a big way in spring 2005, when it bought 71 acres of land in Uckfield, East Sussex, and 41 acres.....continued below

Advertisement starts

---

---

Advertisement ends

near Boston, Lincolnshire.

Its downfall - exclusively revealed in Guardian Money - started in late July when the company sacked all its staff without notice or compensation, following a probe by watchdog the Financial Services Authority (FSA).

The FSA said LHUK was operating an unauthorised "collective investment scheme" - a criminal offence under the Financial Services and Markets Act. While investing in land or property is outside the Act, organising investors to act in concert - perhaps to obtain planning permission or selling land to a developer - falls within the FSA remit.

In March, Guardian Money revealed that landbanker United Land Holdings was shut down for the same reason, following a Department of Trade and Industry raid on its Ideal Home Exhibition stand.

"The FSA guidance is widely drawn, so it could catch any company offering planning arrangements to land purchasers which insist they act together. The FSA can look at any form of 'arrangement'," says Professor Eva Lomnicka, of King's College London, who specialises in financial regulation. "Under contract law, investors in such an unregulated scheme might be entitled to a return of their deposits."

LHUK says it suspended operations in late July, and held talks with the FSA. It says it came to an informal deal where the FSA would not pursue it if the firm offered investors a refund. But it was this offer which finally killed LHUK.

"This resulted in a request for the return of £1m - around 20% of the investors' [money]. This exceeded total funds available, resulting in the company being unable to repay investors in full," says LHUK director Nicholas Stein.

Stein blames the FSA action and the firm's unnamed solicitors who "constructed the scheme". It says it has a new firm - also unnamed - of lawyers who have now "formally put our original solicitors on notice of a negligence claim for substantial damages".