Investors who hope to have a field day

Firms are buying tracts of farmland that have no planning permission then selling it on in smaller parcels to would-be developers. Tony Levene reports

Tony Levene
The Guardian

Here's a sure-fire way to earn a shedload of cash - buy a nine-acre field for £90,000 and divide it up into small blocks and sell them for a total approaching £3.5m.

Now here's a less than surefire scheme to make oodles of money. Buy one of the aforementioned parcels of farmland and wait until it gets residential planning permission. Then - and only then - will the value soar.

The first method is that prefered by European Land Sales Partnership (ELSP), a firm specialising in buying farmland and selling it on to hopeful speculators. The second is offered by ELSP to investors who may still see their land used for grazing horses for decades to come.

ELSP is one of the growing number of firms that buy up tracts of land without planning permission, and then sell it off in small strips to private investors. None guarantees planning permission will be given. But all imply there will be no problem. ELSP bought an 8.5 acre site in Bow Brickhill, a village near Milton Keynes, through local agents Brown & Merry in March. ELSP partner John Beckwith-Smith and associate Stephen Cleave paid £90,000 for the land which is zoned for agricultural use. The agents had originally asked for £80,000.

City of London solicitors Shaw & Croft acted for ELSP. It has now told the land sellers to remove any reference to it in the ELSP brochure.

Investors typically pay £20,000 - ELSP charges £40,000 for the largest 0.1 acre parcel and pro-rata for smaller amounts of land. There are 100-plus to sell.

"An area this size would be worth £8m with residential planning permission," another agent estimated. "But getting it would be impossible in today's planning climate. Selling it for £3m or so is just awe-inspiring. That's 30 times today's value."

Brown & Merry says it has a department dealing in land with any residential potential and that it would have referred the site to this if it had the "slightest chance of interesting a developer." It did not, rating the area as a zero for housebuilding. "There was no interest," the agent says.

ELSP's sales material includes a map and brochures with undeniable statements such as: "The English landscape has evolved since the Domesday Book" and " Parts of East Anglia were marshland until the mid 1700s."

But the real question is whether the Milton Keynes site will get the necessary building go-ahead.

Peter Lousada of the local Preserve Bow Brickhill society is sure it will not.

He cites the comparitive lack of access - a bridleway in one direction and a gate across a narrow strip of landat the end of a cul-de-sac in the other.

"The site has special area status as an area of attractive landscape. Milton Keynes is to be developed to the east and west. We're to the south so any homes will be very long term," he says.

In addition the local plan shows Bow Brickhill free from development until at least 2011 - Mr Lousada thinks it will go well beyond.

"Everything they say in their booklet is true. They imply the land will have a fantastic value - they never state it," he adds.

Local councillor David Hopkins says: "This is not an expansion area. Contrary to what is implied, Milton Keynes is not crying out for expansion land even though the population will increase. As a council, we have identified hundreds of acres on the fringes of the city and this will be more than enough for the next 20 years or more. We want to maintain Bow Brickhill as an amenity for future generations."

Posing as potential investors, Jobs & Money phoned ELSP. We spoke to salesperson Trevor Pillay.

He said it was good news that Councillor Hopkins had said the area would lose its "attractive status".

But he ignored the comparable protection the land will still have under Office of the Deputy Prime Minister plans.

He said there was a new bus stop - a sign of preparing for more people. But locals say this is simply moving a stop from one place near a school on safety grounds.

We asked how long we would have to wait for our money, as if all went according to plan we would more than double our investment.

He said: "We'll apply for planning permission in 12 months' time. If we don't get it then, we'll reapply a year later so it should take about two years. We have a fall-back position of low density housing - four houses to an acre instead of 14. This will give investors a 20% return."

His boss, partner Stephen Cleave, disagrees with Pillay.

He points out the literature does not guarantee any planning permission. And he differs on the time scale.

"We warn it may not happen. There is obviously hope value but we are not selling rubbish like some other companies. This is well researched but it is highly unlikely anything will happen at all over the next seven years. This is not a good idea if you want your money back within 10 years. But we have built up a substantial sum of money which we can use to take on the local council."

Asked about the discrepancy between his time scale and that mentioned by Mr Pillay, he said: "These are sales guys. People should rely on what they are sent in writing and not what they are told. I have already given Mr Pillay a warning. Now I shall give him another."

The partnership has a 21- year option to buy back the plots. It will pay the higher of market value or three times the purchase price. As it is charging some 30 times the present value, that is a safe bet for the partners.

The points to look for

Selling agricultural land at prices that assume it has planning permission for housebuilding has become a major business.

The English Land Partnership, which describes itself as "landbankers" has a glossy brochure that, reasonably enough, suggests land is "subject to market forces" and that "John Prescott has predicted a requirement for over 3.35m new houses by the 2020s."

It also says "over 20% of the UK's top 100 individuals are owners of land or property or associated with property development." This is surprisingly low - presumably almost anyone who is rich owns land or property unless they live in the Ritz.

English Land, which also uses the name Green Gold, is trying to sell 142 plots costing around £7,500 each in a field at Everton Mill, five miles form Bawtry in south Yorkshire. Bawtry, English Land says, boasts "an excellent selection of designer shops and international restaurants." It also has green belt land for sale at Milford (near Godalming, Surrey) where plots average £27,500.

English Land, run by Doncaster residents Ian McCullum and Stephen Qualye, says local planners are more likely to submit to applications when each field is in small parcels and owners apply as a collective. But planners say this is simply wrong.

So if you are tempted to buy land, follow these points:

· Always start with the local authority so you can find out its planning intentions.

· Check out local estate agents - they are often chatty and know about most property moves in their area.

· Ask why national property developers have "missed this opportunity". Barratts, Bellway, Berkeley, Bovis and other big names did not prosper by missing land chances.

· Push landsellers to make firm promises in writing. The "partners" are liable for their personal fortunes if you sue. They cannot hide behind limited liability companies.