A self-invested personal pension (SIPP) and Small Self Administered Scheme (SSAS) are two kinds of pension ‘wrapper’ that hold investments until you retire and start to draw a retirement income. We have acted for many clients and their pension funds in transferring property into these wrappers. This is a short note highlighting the common pitfalls problem areas that we tend to encounter in order to assist our clients in ensuring that their pension fund transaction runs as smoothly and expediently as possible.
We act of the trustees of the pension scheme, which will typically include a corporate trustee and may also include the members of the scheme as trustees. The structure will depend on the type of scheme and how it is structured. The member of the scheme would sell his or her property to the trustee (or trustees, whatever the case may be), who then holds the property on the terms contained in a trust deed.
The beneficiary, in his or her capacity as seller, is typically represented by a solicitor, who should take notice of the following general requirements which are common to all the pension providers we deal with. Your sale to your pension fund is treated just like an arm’s length transaction, which means that:
We always your solicitor to provide us with a contract of sale and a transfer deed. A contract may be dispensed with in limited circumstances, but typically we will always require this. Both the contract and the transfer need to complete our client’s limitation of liability clause to ensure that This will limit our client’s liability to the extent of the assets of the individual member’s scheme at the relevant time.
• Title Information – we require up to date official copies together with a plan of the title number(s) that our client is to acquire the legal title of. In leasehold transactions, we also require evidence of any superior leasehold interest (and the main freehold) as well as any title numbers that are referred to within the title being acquired. Please provide a copy of the registered title plan as soon as possible so we can progress searches but also as our clients members needs to approve the plan
• CPSE – Our client’s risk profile determines that industry standard CPSE must be comprehensively replied to and we will supply all necessary forms for completion depending upon whether the property is freehold or leasehold and whether the sale is to be with vacant possession or it is to be subject to an occupational tenancy. We appreciate, in certain transactions, that both the seller and our client will be connected in some way but our client will still require full replies to CPSE forms. Given that the legal title is changing hands and being acquired by our client in their name (irrespective of whether any connection continues) it is fundamental to our client that it is provided with this property information. In our experience, as each property acquired will need to be sold at some point in the future to liquidate the pension assets and provide a pension sum for the member(s), sale of the property tends to be much simpler and quicker (in our experience) where all of the information has been supplied upon acquisition.
• VAT – we have experienced some difficulties over the VAT treatment of certain properties. We would be grateful if you could investigate at an early stage as to whether VAT is to be charged on the sale and, if you are able, supply evidence in your possession of the election to charge VAT. In certain circumstances the transaction may be able to be treated as a Transfer of a Going Concern (TOGC). For this to happen, the seller needs to be registered for VAT, have elected the property for VAT and for there to be an existing lease to a third party which the transfer to our client will take subject to. Note that we do not provide tax advice, so when you are seeking to rely on TOGC provisions in the contract of sale it is up to you to obtain independent advice from a tax specialist to ensure that it will be effective in providing relief from VAT liability.
• Leaseback – in many connected cases the seller (the SIPP/SSAS member or their company) either takes a lease of the newly SIPP/SSAS property in their own name or in the name of their business. Invariably, their solicitor also acts for the tenant in this leaseback arrangement. Please note that, to adhere to HMRC regulations, the annual rent in such leases cannot be negotiated and must be as specified by any commercial open-market valuation of the property in line with our client’s instructions and in particular in line with the valuation. Note that the length of contractual term for the lease may be subject to negotiation but, if the property has been acquired using mortgage funds from a lender, they may insist upon a minimum length of term (usually no shorter than the length of the actual mortgage term).
• Statutory Compliance – to comply with regulations effected in recent years relating to property ownership, our client requires comprehensive details in respect of the following:
- Asbestos – Our client requires a copy of the asbestos report and management plan in compliance with The Control of Asbestos Regulations 2012 in all cases.
- Energy Performance – from October 2008, all properties that have fixed plant and equipment which “regulates the indoor climate” must provide a certificate in the statutory form. This is called an Energy Performance Certificate and relates to the `cooling’ of properties via air conditioning (not just heating). You will need an EPC where a property is sold, rented or built. The certificate must be issued by an energy assessor who is accredited to produce them for the category of building concerned. It contains information about a property’s energy use and typical energy costs, and includes recommendations about how to reduce energy use and save money. It provides an energy efficiency rating from A to G, with G being the least efficient. The certificate will then be valid for 10 years. From April 2018, landlords are required to achieve a minimum rating of E on the EPC for their rental property.
- Fire Risk Assessment – It is a statutory requirement for all commercial premises to have a fire risk assessment carried out and regularly reviewed to. identify what you need to do to prevent fire and keep people safe. It is our client’s requirement that you instruct a professional risk assessor to provide a written report.
- Planning permissions and Building Regulations – all relevant Planning Permission and Building Regulation consents and completion certificates. If the property includes a listed building you must provide listed building consents. These documents can relate to before you lived at the property but importantly any works carried out by you during your ownership.
- Installation certificates – please also provide safety certificates for the electrical and gas installation at the property together with maintenance reports for any air-conditioning or plant and machinery installed in the property.
How we can help:
Here at Gregg Latchams, we have experience in acting for both landlords and tenants in the context of commercial property transactions and have a great deal of experience in ensuring that every reasonable step is taken to protect your interests. Contact our Commercial Property team for more information.