The following excerpt is from ASIC’s Money Smart website:
If you are considering investing in a land banking scheme, we strongly recommend that you contact the local council where the land is located to ask them if the land will ever be released for development.
A land banking promoter may try to persuade you that the council is not aware of all potential developments.
You should question the promoter's motivation for telling you this.
Is it a managed investment scheme?
If the developers and promoters are legally running a managed investment scheme, they must have an Australian financial services (AFS) licence that allows them to run the scheme.
Many land banking schemes are set up to avoid the characteristics of a managed investment scheme - at least on paper.
The scheme may be a managed investment scheme if:
• investors do not have day-to-day control over managing their investment
• the scheme involves pooling investor funds
• the funds are used to further the development.
You can check ASIC Connect's Professional Registers to see if the developer and the promoter hold an AFS licence.
Is the scheme registered?
In most cases, it is illegal to offer units or interests in what is actually a managed investment scheme unless the scheme is registered with ASIC.
You can check ASIC Connect within the 'organisation and business names search' to see if a scheme is registered with ASIC.
Registered schemes will have an Australian Registered Scheme Number (ARSN) that can be searched.
See illegal managed investment schemes to help you work out if the managed investment is legal.
Remember, if the scheme is unregistered or the operators of the scheme are unlicensed, you will have little protection if things go wrong.
If you have any concerns, contact ASIC.
Read the PDS
If the investment is a managed investment scheme you must be given a product disclosure statement (PDS).
A PDS must include information about the scheme's key features, fees, commissions, benefits, risks and complaints handling procedure.
Make sure you read the PDS.
If you don't understand the investment, get independent financial or legal advice.
Do not confuse the PDS with marketing material used to sell the investment such as brochures or information sheets.
Is the investment right for you?
You should also consider whether investing in a land banking scheme suits your investment goals.
See invest smarter for our tips on matching an investment with your needs and objectives.
Land banking may seem like an easy way to get into the property market, however, there are many risks associated with this type of investment.
Make sure you research and understand what you're getting into before you hand over your money.
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Thursday, 16 January 2020