Landbanking company goes bust - no tears here!

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.

In March landbanker United Land Holdings was also shut down for the same reason. Gladwish who have divided the Ruscombe valley into over 180 house sized plots for sale is still operating. A pity in many ways as there are huge issues about how this beautiful land in AONB will be looked after in the future.


How landbanking works

Landbanking firms offer huge potential gains to investors on the premise that the plots of agricultural land they sell will gain planning permission for housing some time in the future and hence soar in value - the small print clauses usually point out that these profits are not guaranteed and in Gladwish's case are upfront about this being agricultural land. Nevertheless the way the plots are sold in house-sized bites and the literature about pushing for planning can all be persuasive to people not in the know.

According to The Guardian last week landbankers have made nothing for investors. The land sold is invariably zoned for agricultural use or is green belt. Some plots have been on flood plains or well away from road access - in Ruscombe there are some on steep slopes or over badger setts. The Guardian say that few investors ever see their sites - landbankers sell anywhere from Dubai to India, China and Australia - in Ruscombe's case we found one of the plots owned by someone in Canada.

The real gainers from landbanking are the landbankers themselves. They buy land at agricultural prices then divide each acre into 10 to 12 plots, selling each one for £10,000 and sometimes as much as £60,000. A landbank deal becomes a collective investment if the landbanker arranges planning applications or offers plots to a developer. In theory, plot owners could apply for planning permission and sell on their own. But this is difficult - no developer would want to deal with up to 300 different investors while selling land back to a farmer would fetch a few hundred pounds a site.

There'll be few tears here in Ruscombe to hear that another landbanker has gone bust. Read more about land banking in Ruscombe Valley here and the threat to Chalford near Stroud here.