Every Investor | 22 January 2015
Beware fake land investments in Australia
Australian land investment scams have cost 2 investors thousands of pounds
by Christopher Menon
NeglectAssist, a law firm that specialises in protecting people who have lost money following negligent financial advice, is warning private investors to watch out for exotic Australian land investments promising both security and high returns.
It recently come across two such investment schemes that have cost unsuspecting investors dearly and is concerned others are unwittingly investing in such schemes.
Tim Wixted, senior partner at NeglectAssist explained: “Australia has had a strong period of economic growth, particularly because of the high demand for its natural resources from places like China.
“Not surprisingly many investors want to benefit from high returns, and investment schemes linked to Australia’s land and resources can sound very attractive. Having seen two such schemes end disastrously for clients we wish to strongly warn people that they need to think carefully and do a lot of checking when offered such beguiling investments. They must not just rely on assurances from advisers – even established ones.
“In both cases investors were assured that the schemes were suitable for low risk investors, when it turned out they were unregulated and high risk.”
The first scheme was Five Year Super Intensive Leasehold Project with Green Oil Plantations (Australia) Ltd (the “Green Oil Investment”).
With this, for a minimum investment of £10,000, investors could purchase a defined area of a plantation of special trees being cultivated to provide bio-fuel. Green Oil Plantations Australia would then “manage the land and make a series of rental payments to the investor over a five or eight year term, at which point the land will revert back to Green Oil Plantations” according to its documents.
Investors entered into a “Buyback Management Contract” whereby they would receive their full investment plus their 80% return at the end of the term, providing they retained the lease for the full 5 years.
The scheme had been promoted to NeglectAssist’s client as safe for someone with a low risk appetite. In fact the scheme was highly risky and also unregulated (so the normal protections were not in place).
It subsequently went insolvent and he was informed by the administrators that: “Delays in achieving the first harvest and monetisation of the crop led to a lower than anticipated income and cash generation. The Companies (and the Australian subsidiary) do not have sufficient funds to reach harvest and meet their financial obligations to investors.”
He lost all his £10,000 investment (made via his SIPP pension), and NeglectAssist are currently investigating what action can be taken to recoup this from the IFA responsible for recommending it.
The second scheme was a farmland investment scheme in Australia entitled Land Purchase Contract – Verdant Australian Farmland on behalf of GAS Global Agricultural Services Ltd. It was recommended by Alhaurin Wealth Planning – a firm that turned out not to be on the Financial Services Register of authorised firms.
After making an investment of £30,000, the client realised the problems with the investment (unregulated, misleading documentation, and totally unsuitable for a low risk investor) and tried to transfer out of the scheme but is unable to do so. He believes his investment to now be effectively worthless.
Tim Wixted added: “Many people are happy to back risky investments because of the potential high returns. But where people are mis-sold such risky investments as safe it is a big problem, and there are legal avenues available to hold the adviser accountable and often most or all of the investment can be reclaimed”.
The Financial Conduct Authority has some useful information for to help safeguard investors against being conned in dubious land banking scams.