Buying Property Through a SIPP (Self Invested Personal Pension)
This is a guideline intended for clients of the firm who are interested in investing in SIPP properties.
If you haven’t already, you will need to speak to an independent financial adviser if you wish to obtain further information about SIPPs. As solicitors, we are not authorised to give financial advice to our clients.
What properties can be bought?
- Commercial Property, i.e. offices and retail shops.
- Some providers may give hotels, guest houses, pubs, nurseries and nursing homes some consideration (i.e.may accept these as SIPP investments) but, generally, these properties will not be acceptable. The Property should ideally be freehold but most SIPP providers will consider long leaseholds.
- Development land
- Agricultural land
- Residential Property
- you need to be aware that special rules apply. The investment must relate to a portfolio worth at least £1m or, alternatively, must comprise at least three properties.
- Overseas properties
Who is buying the property?
- Your trustees of the relevant SIPP trust will be buying the property and they will be the legal owners of the property.
- If you are taking out a loan for the purchase, the loan cannot exceed 50% of the net property value. The borrower will be the SIPP trust.
What are the advantages?
UK Commercial Property is entirely free of UK taxes, i.e. rental income tax and capital gains tax
- In relation to overseas properties please note that local taxes may apply
- Please speak to your independent financial adviser in relation to the advantages and disadvantages a SIPP property could have for you.
What do I need to keep in mind when looking for a property for my SIPP?
The SIPP provider is acting as a trustee for you (and any other members of the SIPP) and therefore it will, in all legal documentation, limit its liability to the value of the assets of the trust (in order to avoid any disadvantage to other SIPP schemes which they may be acting for).
- SIPP providers will carefully check the environmental condition of the site and will also need to obtain a comprehensive valuation of the Property. This will delay the start of the usual buying process. In light of this you should make your seller (or agent) aware that you are intending to purchase the property into a SIPP.
- Most SIPP providers have a regulated process of approval for prospective properties. Consequently, acquisitions at auction will be subject to special conditions. You should not try to bid at auction for a property for your SIPP without first checking your SIPP provider’s standard policy.
- If the property is vacant, occupational leases can be granted directly by the SIPP provider (being the legal proprietor). If the property is subject to occupational leases the SIPP provider will take them over as landlord but it will seek advice on any onerous conditions which may be contained in the existing lease documents.
- If you are taking out a loan to facilitate the property purchase you should check with the mortgage provider that it is providing loans for SIPP trusts (as special rules apply). Arranging finance is generally your responsibility so whilst the trustees are the borrowers, you will need to organise the loan.
- If you wish to sell the property, it needs to be comprehensively valued again because the SIPP trustees will not permit a sale at an under value.
- In principle it is possible for the trustees to elect to waive the VAT exemption on the property if preferable. You need to inform your SIPP provider before you purchase the property if you wish to elect to waive the VAT exemption.
How will the day to day management of the SIPP property work?
- Most SIPP providers will pass responsibility for management of the property to the member/beneficiaries.
- You will be responsible for the insurance of the property unless the SIPP provider has a standard block policy available. Therefore, it is recommended that you check with your SIPP provider prior to exchange of contracts.
- The SIPP providers will charge an administration fee for dealing with the purchase and the ongoing administration of the property. The providers will usually be able to let you have a list of their standard fees.
You can find further details about SIPP investments on the website of the Pension Regulator or from your IFA.
We have a team of property solicitors with a wealth of experience in dealing with SIPP providers and with members in relation to the acquisition and disposal of SIPP properties.
In August 2008 Healys successfully joined the Association of Member Directed Pension Schemes (AMPS) thus demonstrating its expertise in the field.