Commercial Property Investment
Experts in commercial property
Our wide experience of buying and managing property and managing SIPPs puts us in an ideal position to meet your needs. We have developed relationships across the property industry and can provide access to a range of support.
Before deciding to invest in commercial property, it is important that you consider both the benefits and the risks of holding a property in your SIPP and the commitments you can expect to make. You also need to understand how your investment can be affected by the way you manage the property.
How we can help
When we acquire commercial property via a SIPP, the ongoing management of the property will be arranged by our in house Property Management Team, unless a third party property manager has been appointed.
We have relationships with a number of key property professionals and a panel of property professionals, and can help you access services to help manage property within your SIPP.
You can still use your own choice of professionals, and are not restricted to the panel; however, fixed pricing and service level agreements have been arranged to provide a streamlined and effective service that you can take advantage of.
You can find links to our Panel of Professionals below.
For new commercial property enquiries
For new commercial property enquiries, please contact your financial adviser.
For existing Curtis Banks clients, please contact the Property New Business Team on 0370 414 7000.
Learn more
We have a wealth of information about commercial property pension investment in our Property Guide, offering key regulatory and process information to help you on your journey with Curtis Banks.
What types of property can you hold in a SIPP?
We own properties across the UK with uses ranging from the ordinary to the extraordinary. Our experience of property purchases, ongoing management and pension administration ideally positions us to provide for your client’s SIPP or SSAS property needs.
If it’s commercial and based in the UK we will happily assess it, be it freehold, leasehold or commonhold. The most common types of property that we see include shops, offices, restaurants, land, industrial units, hotels, and leisure facilities.
We can also hold cinemas, breweries, sports stadia, golf clubs, pubs, museums, dentist/doctor surgeries, forestry, care homes and many, many more. Every property purchase is subject to satisfactory due diligence.
There are some property types that we are unable to acquire. For more information here, please refer to our Property Guide.
When investing in property, a SIPP can only buy the land, bricks and mortar and those parts of the property that are essential to its structure. A SIPP cannot buy any goodwill or fixtures or fittings.
Frequently asked questions
Tax advantages:
There are a number of tax advantages of investing in commercial property:
- Any growth in the property value, when held in a SIPP, is free from Capital Gains Tax. The rental income received by your client’s SIPP is also tax free.
- Pension legislation allows a SIPP to borrow up to 50% of the net fund value, less any existing liabilities to purchase a property.
- Additional tax advantages may arise if your client sells their business premises to their SIPP and lease it back to their firm. For example rent paid to the SIPP is a deductible business expense and could therefore reduce both the income or corporation tax liability to the client’s business.
- Please refer to the SIPP Key Features Document for more information regarding pension benefits such as tax relief on contributions or Inheritance Tax opportunities.
Risk considerations:
Some of the main considerations are highlighted below:
- Property can be difficult to dispose of and may take longer to sell than many other pension assets. Your clients will need to consider the likely future resale value to minimise any issues when looking to sell the investment.
- You should always ensure that there are sufficient cash holdings within your SIPP to meet liabilities attached to the property such as business rates, third party fees or insurance. If funds are not available to settle liabilities we may look to sell the property.
Yes, however buying a property at auction can be a fairly complex process, operating in very tight timescales. Pre-planning is essential if this is the preferred route to invest. It is essential to engage with Curtis Banks as soon as possible prior to the auction.
There are two options when it comes to bidding at auction.
The client bids for the property on behalf of their SIPP
In order to do this, Curtis Banks would need to receive and approve all due diligence information before you can place a bid at auction. This includes, but isn’t limited to:
- a valuation report
- an environmental search
- a report on the legal title
- a copy of any occupational or long leases
The appointed solicitor and valuer would provide this information to Curtis Banks. You can find a more detailed list of our due diligence requirements in our Property Guide.
Assuming that Curtis Banks could complete the due diligence checks prior to the auction, you would be authorised to bid on behalf of the SIPP at auction, up to a pre-agreed value dependent on the cash value of their SIPP. Assuming that you are successful at auction, the SIPP would pay the deposit monies (usually 10% of the purchase price) to the auctioneer, and you would sign the contract on behalf of the SIPP. This process is ‘exchanging contracts’, legally contracting Curtis Banks on behalf of the SIPP to complete the purchase.
The SIPP would then have a set period of time as specified at auction (typically 30 days) before completing the purchase. It is important to note that the typical timescale for a property purchase is upwards of 16 weeks and it is therefore unlikely that the SIPP would be able to complete due diligence within a much smaller timescale before auction. Curtis Banks are heavily dependent on third party professionals to provide the required information to us for review.
The client bids in their personal name at auction
We often find that this process is followed in cases where it isn’t possible for Curtis Banks to complete the required due diligence before the auction date. In this case, you would bid for the property in your personal capacity, and (assuming you were successful at the auction) you would personally pay the deposit and exchange contracts in your name.
The SIPP would then begin the due diligence process, with a view to assigning the contract to Curtis Banks and completing the purchase within the time period specified in the contract. If this timescale couldn’t be achieved, you would be legally obligated to complete the purchase of the property in their personal capacity. The SIPP could not fund this transaction nor any associated fees. To proceed with this option, you would need to be able to pay for the property and transaction costs yourself.
You could then look to sell the property to the SIPP. There are some additional considerations here:
- In order to comply with HMRC regulations, any connected party transactions must take place at market value as defined by a regulated valuer. This price may differ from the price paid at auction.
- Assuming that the property purchase price is in excess of the Stamp Duty Land Tax (SDLT) threshold (currently £150,000) then you would personally pay SDLT on their purchase, and the SIPP would also need to pay SDLT on the purchase by the SIPP. This outlay cannot presently be reclaimed.
- If due diligence requirements cannot be fully satisfied, the SIPP would be unable to acquire the property. SIPPs operate in a highly regulated environment and as such, have more stringent due diligence requirements than a personal purchaser may have. For example, if the environmental report highlights historic contamination, the risk of which could not be mitigated, Curtis Banks wouldn’t be able to acquire the property.
The ability to purchase property at auction is one of the surprisingly flexible options available through SIPPs. If you have any questions or would like to talk to us more about the opportunities available, please contact us.
If a property is used for, or is suitable for use as a dwelling, or is land that forms part of the garden or grounds of such a property, it may be classed as taxable property.
Curtis Banks is unable to purchase taxable property into a SIPP. A full definition of taxable property can be found in the Finance Act 2006, schedule 29A, Part 2, section 7(1) (a).
If Curtis Banks were to purchase taxable property falling under the above definition, HMRC would impose severe tax implications on both Curtis Banks and the pension. We are therefore unable to, in most situations; purchase an asset if it does include a residential element.
Examples of taxable property are:
- Holiday Lets
- Hotel Rooms with catering facilities in the individual letting rooms
- Aparthotels
There are certain circumstances where the pension can acquire properties with a residential element, if the residential element is to be used in conjunction with the commercial property. There are additional HMRC regulations that would apply here - please contact us to find out more.
There are other types of property that we are unable to acquire into a SIPP. Additional information about allowability and taxable property can be found in our Property Guide.
Unfortunately, we are unable to acquire commercial property outside of the UK.
Yes. In many cases, we will have purchased the property from a connected party, will be selling the property to a connected party or will be letting it to a connected party.
In these cases we must act as if it were ‘an arm’s length transaction’, that is, each party must be acting in their own self-interest and is not subject to any pressure or duress from the other. If we are dealing with a connected party in any transaction, we will require valuation advice from a RICS* qualified surveyor as to the terms for the transaction.
Where we let a property we own to a connected tenant we must ensure that a valuer is instructed to ensure that any lease events (including rent reviews, lease renewals and maintenance/repair obligations) take place as per ‘an arm’s length transaction’.
*Royal Institution of Chartered Surveyors
A SIPP can borrow up to 50% of its net fund value less any existing liabilities. The ability to borrow does not cease when benefits are being paid from a SIPP; it can be put in place at any time for the purpose of purchasing or developing property.
The terms of the loan vary from case to case as they are often dependent on a variety of factors (for example, degree of risk to the lender) and any special mortgage conditions will need to be assessed on a case by case basis for acceptability. We will always require that the charge over the property be fixed to the value of the client’s SIPP. We are quite happy to deal with any regulated lender that meets our requirements. The loan must be in our name as the legal owner of the property and not the client personally.
We are able to facilitate personal lending to the SIPP for property purchases or redevelopment. There are additional requirements in respect of personal borrowing, put in place to ensure compliance with HMRC regulations. These requirements are outlined below:
- The lender must be the client personally or a business that they are connected to (director/shareholder)
- Our pro-forma loan agreement must be utilised
- The client must provide a market comparison of the proposed rates for the loan (to evidence that the loan is representative of an open market agreement)
The income generated from the property must be sufficient to fund all the liabilities associated with the property. Sufficient funding for the property, any required cash float and all associated purchase costs must be in place within the investing SIPP(s) before contracts can be exchanged on a property purchase.
We are also able to facilitate personal borrowing for the purposes of paying VAT due on a property purchase. The above criteria will apply for VAT loans also.
For more details on how to lend via a SIPP, please see our Property Guide. We also have a helpful case study which outlines the process of borrowing funds to acquire a second commercial property via a SIPP, which can be found here.
We do not offer the ability to self-manage a SIPP property.
When we acquire commercial property via a SIPP, the ongoing management of the property will be arranged by our in house Property Management Team, unless a third party, qualified property manager has been appointed.
Our Property Team undertakes:
- Setting up and maintaining SIPP property records
- Managing the property bank account
- Arranging and renewing the property insurance via our block insurance policy
- Communicating with all third parties including valuers, property managers, lenders and solicitors
- Invoicing and collecting rent, insurance premiums and, where applicable, service charges
- Paying third party invoices from the SIPP and recharging these, where possible, to tenants
- Overseeing loan accounts and payments
- Dealing with VAT for VAT elected properties
- Arranging rent reviews
- Arranging new lease, lease renewals, lease variations, assignments, subletting and surrenders
- Arranging lease end procedures, including dilapidations settlements
- Credit control, including management of tenant rent arrears and implementation of payment plans
- Liaising with administrators and liquidators in the event of tenant failure
- Receiving and processing tenant applications, for example to assign, sublet or alter or change the use of property
- Arranging any development or building works, including repair works
- Arranging the valuation of the property for drawdown purposes
- Arranging vacant inspections
- Ensuring that the property is managed within HMRC requirements
Our property team is structured into specialist teams to provide you and your clients with all aspects of their SIPP property journey.
Since 2008, certain properties have needed to have a valid Energy Performance Certificate (EPC) before they are sold or let.
Since 1 April 2018, leases for commercial (non-domestic) properties in England or Wales have only been granted or amended if the property has an energy performance rating of A to E or is exempt from the regulations. If the property doesn’t hold a minimum E rating and is not exempt, one of the following must apply:
- Building work to gain an energy performance rating to ‘E’ or better:
If a lease is to be granted or amended, the work needed to reach the minimum energy standard must be completed before we exchange contracts on a purchase or agree to any lease or amendments. Your client may want to consult an energy assessor (or give us the name of one to contact) to see whether building work is practical. - An exemption from MEES:
If the property qualifies for an exemption, we will need evidence of this so that we can apply for one (as the landlord). Most exemptions are temporary. If this is the case, we will need your client to tell us before the exemption ends how they will achieve the minimum rating.
If your client can achieve the minimum rating by completing renovations or improvement work, we will only consider buying the property if we have the following:
- Confirmation from an energy assessor, surveyor (or equivalent) that improvements will secure the minimum E rating;
- A schedule setting out the costs of the improvements; and
- Confirmation that there are enough funds in the SIPP to pay for the improvements (at the time contracts are exchanged).
Throughout a property journey, you will need a range of professional suppliers to assist with a range of activities. Some of these activities are mandatory, some regulatory and others discretionary, but ultimately choosing the right suppliers can influence the performance of the commercial property investment. You can choose your own, however the purchase and ongoing management of property within a pension is a specialist area.
Panel of Solicitors
Working with many different professionals has taught us the value that experience can add. We have established a panel of legal firms throughout the UK who are experienced in dealing with SIPP and SSAS transactions and acting on our behalf. Selecting one of the panel firms brings the benefit of lower fees.
Panel of Valuers
We also have a panel of valuers available who are experts in commercial property and pensions. The panel includes members of the PAI Commercial Property Network. You can still choose your own RICS accredited valuer and are not restricted to the panel. However, by working with a Panel Firm, you will benefit from fixed pricing and agreed service level agreements.
Panel Energy Assessor
We also have a panel national energy assessor firm, EPC Choice, who are able to provide Energy Performance Certificates and advice regarding energy efficiency in order to meet Minimum Energy Efficiency Standards (MEES) regulations. More information regarding MEES and the impact on SIPP and SSAS properties can be found here. As with our panel solicitors and valuers, you can still choose your own qualified energy assessor and are not restricted to the panel. However, by working with our Panel Firm you will benefit from fixed pricing and agreed service level agreements.
Ongoing obligations
While we hold property within your SIPP you will need to work alongside us to ensure that the property is managed in accordance with HMRC requirements and the terms of the lease.
Instructions
From time to time we will require your instructions or authority to settle bills or manage the relationship with the tenant. Unless we are legally obliged or contractually entitled to proceed with a particular course of action we will usually seek your instructions. For properties owned on behalf of a group of individuals you and your syndicated members will nominate a lead member for us to correspond with and to supply decisions.
Valuations
Throughout the time you hold a property within your SIPP you may wish to request formal valuations to help with your financial planning. There will also be times that Curtis Banks will require valuations of the property or, either as a result of pension regulations, insurance or due to the terms of the lease. In these circumstances we cannot deviate from valuers advice. Events include:
- Lease renewals or new leases for connected tenants to advise us of market rents and terms
- Rent reviews for connected tenants where terms are linked to market rents
- Taking retirement benefits or, if you are already in capped drawdown, reviewing your income limits. Income limit reviews will be required every three years prior to age 75 and annually thereafter
- In accordance with the terms of insurance – Please refer to our property insurance notes.
You can nominate a valuer of your choice to carry out the report. If we do not receive instructions from you as to which valuer you wish to appoint we will appoint a valuer from our Panel of Professionals.
Liquidity
It is your responsibility to ensure that there are sufficient funds within your SIPP to meet the liabilities associated with the property, such as mortgage payments, VAT, third party bills (including service charges, business rates, utility bills and insurance) and your SIPP fees. If you do not make cash available to meet liabilities that have been notified to you we may need to force the sale of the property.