SIPP/SSAS Property Purchases

Buying a property through a SIPP or SSAS is a significant decision which will have a substantial impact on your pension scheme. Our team of very experienced solicitors can help you through the conveyancing process, ensuring that you do not fall foul of pension regulations along the way.

Why invest in commercial property with a SSAS or SIPP pension?

Purchasing a commercial property through a SIPP or SSAS pension scheme is an attractive proposition for providing pension arrangements to individuals and business owners as it offers significant tax advantages when compared with a purchase outside a pension scheme. 

The property is dealt with in the same way as any ‘regular’ property. The same title investigation is carried out, as well as the usual conveyancing searches and enquiries, to ensure the property is legally sound and that the purchasing scheme’s interests are protected. 

Our team can draw on a very wide range of experience with pension scheme purchases to find solutions to issues which arise during the conveyancing process and ensure compliance with pension regulations and pension trustees’ requirements.

Key Contact

Chris Twaits

Partner & Head of Commercial Property

EXPERT LEGAL GUIDANCE  

Helping you and your clients navigate SIPP and SSAS commercial property purchases.

Which 'types' of commercial property are permitted in a SIPP or SSAS?

Pension schemes are only permitted by regulations to invest in commercial properties, and many professional pension trustees have their own restrictions and exclusions of certain types of commercial property. 

Properties which are generally acceptable include:

  • Industrial and Warehouse Units
  • Offices
  • Shops
  • Restuarants and Bars
  • Day Nurseries
  • GPs and Vets practice premises 
  • Leisure Facilities – such as Gyms and Bowling Alleys 
  • Land – whether Agricultural or Development 

Additional factors affecting SIPP and SSAS commercial property purchases 

1. Limitation of Liability 
Ensuring that the scheme trustees are not exposed to liability which exceeds the assets of the pension scheme.

2. Residential and other excluded property ‘types’ 
Residential property, and some institutional residential property, is not permitted in the pension scheme, subject to some limited exceptions. Find out more about mixed-use SIPP or SSAS properties > 

3. Limits on borrowing
The maximum amount a pension scheme can borrow is 50% of the value of assets already held by the scheme and it can only enter into a first legal charge. The 50% limit also includes any borrowing to fund VAT payable on a vacant commercial property purchase. 

Buying a property through a SIPP or SSAS need not delay the transaction. We can start the conveyancing process on your behalf while your pension scheme goes through its preliminary procedures, so that you are ready to exchange contracts or complete the purchase as soon as your pension scheme is set up.

Alternative funding for a SIPP/SSAS property investment purchase 

Joint Ownership

Applying to both SIPP and SSAS pension schemes which wish to purchase a property but have insufficient funds already in the pension scheme and limited ability to make further contributions, joint ownership offers a solution by allowing individuals or groups within a scheme or their companies to own part of the property. 

Private Lending

The pension scheme can borrow funds from the members or their companies, whether they or their companies are joint purchasers or not. This borrowing is subject to the 50% limit. If the loan is to be secured, the pension scheme must enter into a first legal charge and the terms of the loan are controlled by regulations so as to be on commercial terms.

Mixed-use properties

There are certain cases where mixed commercial and residential property use is acceptable for inclusion within a pension scheme. Using the example of a public house, there may be a residential element which provides accommodation for an employee of the business and contractually forms a part of the employee’s renumeration.

Provided that the right to occupy the accommodation is linked to employment in the business at the property the residential element of the property can be accepted into the pension scheme.

The lease of the business must limit the use of the residential element of the building to a service occupancy. If this clause is breached by the tenant, the pension scheme, as Landlord, could legally forfeit the lease and there could be a tax charge on the scheme.

Contrast a high street shop which has a flat above it. If the flat is not used under a service occupancy arrangement it cannot form part of the property in the pension scheme and would have to be separated out of the title held by the pension scheme.

Read our latest ‘Mixed-Use’ Pension Property Property article: Structuring SIPP and SSAS Investments With a Residential Element > 

Leases

Once bought, the property must be used to produce income for the pension scheme, usually by letting it out. The scheme members’ company will usually trade out of the property, or, in some instances may grant a lease to a third party.

There are a number of leasing alternatives:

1. Use by the SIPP or SSAS members’ own business
When this option is taken by the pension scheme, the pension provider will require valuations to be made in order to confirm the current market rental rates and to ensure that the terms of the lease have not been designed to favour the tenant unfairly. Failure to scrutinise the lease could result in a breach of HMRC regulations.

2. Letting to a third-party occupier
Leasing the property to an unrelated third party can be an attractive option for SIPP or SSAS pension schemes as there is significantly more room for negotiation and therefore a higher lease value.

3. Purchase with existing tenant
In this scenario, it is advisable to instruct a specialist pension property solicitor to scrutinise the terms of the existing lease. This process ensures that:

  • The lease complies with all of the purchasing pension scheme’s regulations
  • Clauses within the lease are acceptable and if not, are modified correctly; if modifications to the lease are proposed, it is possible that the existing tenant may disagree with the wishes of the new owners, which can result in delay
  • The lease stipulates that the existing tenant is liable for all outgoings and payments such as service charges

BUYING UK COMMERCIAL PROPERTY USING A SIPP

What should you be aware of when considering a SIPP or SSAS commercial property purchase or sale?

Termination of a lease

One of the main concerns for pension schemes planning to sell a commercial property is how to obtain possession from the occupier while minimising loss of rental income.

Often an agreement to surrender is entered into with the occupier at the same time as the contract for sale is exchanged so that the lease ends on the same day as the sale, thus maintaining rental income until the sale is completed.

Buying a leasehold property

If the scheme is purchasing a property held on a long lease, there may well be no limitation of liability clause in place.

In this case, it is advisable for the pension scheme to request that the landlord vary the lease and incorporate the pension scheme’s chosen wording.

VAT

Frequently VAT is payable on the purchase price of a commercial property. Where it is payable the pension scheme should make a VAT option before completion to enable the VAT to be reclaimed.

If the property is already leased to a tenant who remains in occupation after the purchase has been completed and a VAT option is made by the pension scheme, then no VAT may be payable, with a related saving of Stamp Duty Land Tax. Speak to Steele Raymond about VAT on your commercial property purchase >

Stamp Duty Land Tax

Stamp Duty Land Tax applies to pension schemes and is calculated on the VAT inclusive amount of the purchase price.

Meet Our Specialist Pension Property Investment Solicitors

Meet Our Specialist Pension Property Investment Solicitors

Chris Twaits​
Partner & Head of Commercial Property​

Chris has acted for SIPP and SSAS pension trustees for over 18 years in the acquisition, sale, letting, mortgaging and in-specie transfer of commercial property investments.
READ MORE >
Jennifer Rogerson
Partner & Pension Property Specialist​

Jennifer has been dealing with all aspects of pension property work for nearly 20 years. In particular, she has handled a significant number of transactions involving joint ownership structures with complex funding arrangements.
READ MORE >
Caroline Probert
Partner & Pension Property Specialist​

Caroline is very experienced in a wide range of commercial property work and has specialised in pension property work since 2004. She has a reputation for being proactive and finding solutions for clients.
READ MORE >
Johanna Hammersley
Senior Associate & Pension Property Specialist​

Johanna is an Associate Solicitor in our specialist pension property team and has been dealing with pension property work for over 12 years. Her expertise covers everything from simple lease renewals to member tenants, to complex joint ownership purchases which are subject to bank finance.
READ MORE >
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