With the demise of fixed salary pensions and the ever greater importance placed on planning for the future, the purchase of commercial property with a Self-Invested Pension Plan (SIPP) or a Small Self-Administered Scheme (SSAS) is becoming increasingly popular. This article sets out a few points worth remembering.
If there is a connected party (which is usually the beneficiary of the SIPP or SSAS, a relative or a company which they have an interest in) involved:
- Should the property be purchased from a connected party then you will need a market valuation by a suitably qualified RICS registered valuer to set the purchase price.
- When the property has been purchased from a connected party then once transferred the control of the property will lie with the trustees of the SIPP or SSAS and as such the connected party will no longer have the same control over the property as they have been used to, even if they are a trustee or beneficiary.
- Where the property is going to be let to a connected party, the rent payable by them will need to be determined by a suitably qualified RICS registered valuer.
If you are purchasing from an unconnected party:
- Be realistic with your timescales, SIPPs and SSASs are cautious but dependable buyers. Due to the procedural requirements that the trustees and the legal advisors involved in the transaction must adhere to these transactions can take longer than where the purchaser is a private individual or a company.
- Due to the trustees having to accommodate the SIPP or SSAS being a cautious purchaser, they are unable to just 'take a view' on issues and will normally require the issue to be remedied or an appropriate indemnity policy to be put in place as part of the purchase.
- Be clear with the seller that you are purchasing with your SIPP or SSAS from the outset. If you have not setup your SIPP or SSAS when you agree the purchase, it is realistic to allow 10 to 12 weeks for the SIPP or SSAS to be created and then the purchase legalities for the property will normally commence.
General hints and tips:
- If you are selling a property to your SIPP or SSAS, in order to ensure as smooth a sale as possible ensure your documentation is up-to-date prior to the sale. The purchasing solicitor will definitely require an EPC (if legally required), Asbestos Report and Fire Safety Assessment, they will also likely require a copy of any health and safety file available, any maintenance documents for air-conditioning or heating systems and any other documentation you think may be of relevance. There is no such thing as too much information in such circumstances.
- Instruct a solicitor with experience of SIPP and SSAS based transactions. This is a specialised area of property law and not all practitioners have the necessary experience to achieve the efficient and smooth outcome sought by all parties.