Expert View: Legal considerations when buying property through a Self-Invested Personal Pension (SIPP)

Steven Haynes

Published: 12:02 PM February 26, 2018 Updated: 3:03 PM November 1, 2020

Steven Haynes, commercial property lawyer at HRJ Foreman Laws Solicitors - Credit: Archant

Steven Haynes at HRJ Foreman Laws Solicitors highlights some key legal considerations if you’re considering investing in property via a SIPP.

A SIPP can be a tax efficient way of investing in commercial property, particularly for business owners who can buy their business premises through a SIPP and then lease the premises back to the business.

No shortcuts – Where the SIPP is buying your business premises, you might want limited paperwork and a low legal cost on the basis that you already own and are familiar with the property. The difficulty is that most purchases are with a mortgage so the solicitor must issue a ‘certificate of title’ to the lender confirming all is in order. Even if there is no mortgage the professional SIPP trustee will require a similar certificate. A solicitor can only give the certificate by doing a thorough title investigation.

Hidden problems – You might use a property for many years without a problem but that doesn’t mean the property is suitable for a mortgage. An example might be an undocumented right of way. A professional trustee or lender is likely to classify such an issue as a title defect and require it to be addressed. This can sometimes cause tension between a client who considers something to be ‘no issue’ and the trustee or lender who requires the solicitor to fix it.

Extra lawyers - To buy your premises in a SIPP and then lease them back will probably need two solicitors – one acting for the SIPP (and any lender) and one acting for your company. The SIPP (and lender) won’t generally agree to the same solicitor acting for both parties, which increases the legal costs.

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Plus extra paperwork – SIPP providers must comply with regulatory requirements, which can sometimes seem like extra layers of bureaucracy for a client. The more helpful you can be in providing information, the easier the process is likely to be.

If you’re considering using a SIPP to buy a commercial property, ensure you choose a firm with experience who can help make the process as smooth as possible.