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I have published an advertisement on a classified website to sell undeveloped land I own in Sri Lanka.

Through this, someone contacted me by email saying he wants to "invest" in the property.

He claimed he is from the United States and gave some personal and family information, and a contact number too.

He said this:

I am very interested in buying this your properties and if also if you'll make yourself available to be my business partner too

if you could make yourself my partner and be a source of management to the property that is bought by me as an investor, I would be grateful because I cannot directly be involved due to your country's foreign investment policy, where foreign equity is restricted.

What I have done are

  1. I search the contact number through some online databases for scams, which came out clean.
  2. Contacted him via the number (after multiple attempts), yes he does have an American accent (not 100% sure)

I asked why he's interested in Sri Lanka. He said, "I think due to the recent bombing in Sri Lanka, properties have become cheap".

After a few more conversations I gave him Name, address, occupation, etc To prepare the MOU. But I didn't give him credit card or banking details (which he didn't request).

I have mixed feelings about this. can someone guide on handing these types of situations?

I will keep this question up to date since the situation is evolving.

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primeChandi
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3 Answers3

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I cannot say if this is a scam or not. It is apparently very complicated though.

Per the United States Department of State document 2019 Investment Climate Statements: Sri Lanka, subheading "Limits on Foreign Control and Right to Private Ownership and Establishment":

Foreign ownership is allowed in most sectors, although the land ownership law prohibits foreigners from owning land, with some exceptions. Foreign investors are permitted to invest in company shares, debt securities, government securities, and unit trusts. Most investors cite acquiring land as the biggest challenge for any new business in Sri Lanka. Private land ownership is limited to fifty acres per person.

...

Generally, Sri Lanka prohibits the sale of public and private land to foreign nationals and to enterprises with foreign equity exceeding 50 percent. However, on July 30, 2018, Sri Lanka amended the Land (Restriction of Alienation) Act of 2014 allowing foreign companies listed on the Colombo Stock Exchange (CSE) to acquire and hold free hold land. The amendment also removed a prohibition on foreign nationals owning condominium property below the fourth floor.

This means that your American investor cannot buy your land outright unless he represents a company traded on the CSE. This could mean that:

  • You are entering a deal that requires a partnership or investment instead of an outright sale. This suggests you need a local lawyer or expert in managing such deals.
  • You are being used as a front for the investor to bypass restrictive Sri Lanka law on land sales. He lives in America, you live in Sri Lanka. This may or may not be legal. It may or may not be a scam. It is certainly a seemingly complicated area of law.

You should consider - Which one of you will the local authorities seek out if this deal goes bad or is not entirely legal? Even if it is legal, how much paperwork and liability would you have to do as partial owner and property manager?

I also see in this document that:

The government owns approximately 80 percent of the land in Sri Lanka

This means that you own part of a scarce or tightly controlled resource in Sri Lanka. I think a good answer would more fully cite Sri Lanka law on the matter. Citing US State Department documentation presents this from your purported American investors side. Corroborating that from the Sri Lanka side would be smart.

I would argue that you should consider two things about the deal. If the answer to both is yes, only then do you need to worry if this is a scam: 1. Do you want to sell your property for partial equity or a discount? 2. Do you want to actually be a property manager?

My thinking is that if you just want to cash out your land and move on then you should just sell it for cash and move on. If you wanted to be a property manager, why don't you just manage your own property as 100% owner and get all the profits? Why use an investor?

Freiheit
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I believe this is a scam for two reasons:

  1. The paragraphs you quoted were not written by a native English speaker. It's possible that the person is from the US and is not a native English speaker, but you stated they have an American accent, which seems odd; my guess is the person you spoke with is not the same person that wrote those words.
  2. The person requested your credit card and banking information in order to form the agreement. I can maybe understand why the person would need your banking information if they are going to wire you money, but there is no reason I can think of that they would need your credit card information in order to pay you.
TTT
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I think it would be a good idea to re-phrase the question to "How can I find out if this is a selling scam"?

It may help you or it may not: I am also an investor (EU based) who's interested in property in countries where I believe they still have reasonable prices for buying now and show some potential in the near future; so if I was interested in Sri Lanka I would possibly have made you a similar offer. Just because a remote investor needs local hands who he trusts.

A quick research leaves me with the impression that foreigner actually can buy and own land in Sri Lanka, yet one has to double-check if that comes with any strings or not. Like for example there are countries that make a distinction between different types of land (agricultural versus residential) where foreigners can own one type but not the other. When you say "undeveloped land" this sounds a bit like "desert / meadow now but suitable to build houses / appartements onto it".

So you have to ask yourself ideed:

  • Why do you intend to sell? Do you need the money for something else? Is it land you inherited and don't have any use for and you maybe want to get rid of as in some jurisdictions owning land costs taxes even if it doesn't generate any income?

  • Would you be interested in developing your land but you are lacking funds and know-how? In that case partnering up with someone who can offer both might indeed make sense. In that case, make sure you know who you are talking to and still (no matter how good you feel about the person) make sure to find a source of independent advice in how to setup such as project in a way that you will not loose your rights in it in the end.

If you just want to sell and go away with the money, think if you can find your potential buyer some contacts in Sri Lanka; invite him to come over (at his cost) and make him known to local people. If he is serious and not trying to cheat anyone, he may be greatful, give you the money you want and partner with someone else if you are not interesting in entering a partnership.

Yet he should understand that you are acting with professional care and meeting in person would be a good first step. As we possibly wants to see the land it's up to him to come and see you, not vice versa. And if we doesn't want to invest a week of his time and a plane ticket to Sri Lanka, this would then ring my alarm bells.

HTH

TorstenS
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