Property purchase process
This page outlines the key stages involved in purchasing property through a pension, from initial enquiry and funding through to completion and ongoing management.
1. Approval of the official premises/land
Talbot and Muir review information provided by client or adviser to ascertain whether the commercial premises/land can be held as an asset of the pension scheme.
2. Connected/non connected purchases
If the property is to be purchased from a connected party, such as the client themselves or their business then we must demonstrate it is an arms length transaction as an HM Revenue and Customs requirement, which will mean we will require an independent market valuation. In addition, if a lease is to be put in place an independent rental valuation will also be required.
3. Completion of forms
We'll appoint the chosen lender if borrowing is required for the acquisition. We'll confirm the maximum borrowing to the bank on request and liaise with them regarding the agreement and transfer of funds. (Borrowing is restricted to 50% of the net assets of the scheme).
4. Environmental screening
We'll instruct a company called Landmark to carry out an environmental screening report (SIPP only). The report is carried out to ensure there are no contamination issues with the premises or the surrounding area. The fee for this report can be debited from the SIPP bank account. A report is not compulsory for a SSAS as a restriction on title is placed in favour of the Independent Trustee (TM Trustees Ltd).
5. Appointment of Solicitor(s)
Choose a solicitor from our trusted panel to act on behalf of the Trustees of the pension scheme (required for SIPP property transactions, option for SSAS).
The panel are specialists in properties and pension scheme transactions. They'll work to a fixed pricing structure and agreed service levels.
6. Borrowing
We'll appoint the chosen lender if borrowing is required for the acquisition. We will confirm the maximum borrowing to the bank on request and liaise with them regarding the agreement and transfer of funds. (Borrowing is restricted to 50% of the net assets of the scheme).
7. Dealing with issues
The solicitor will refer any matters for consideration to the administrator managing the SIPP in the first instance. The administrator will liaise with the adviser or directly with the client to resolve any concerns so the purchase can proceed.
8. Insurance
It is vital to ensure that the property is always insured.
Property insurance, on our block policy, is arranged by Arthur J Gallagher.
This insurance arrangement through Arthur J Gallagher is not mandatory but if you do wish to make your own insurance arrangements there will be an additional charge of £150 plus VAT per annum.
This is to cover the administration costs for reviewing the alternate cover you have arranged to ensure it meets our minimum criteria. We reserve the right to delay the exchange of contracts on the purchase until such time that we are satisfied with the policy wording.
The minimum criteria for any insurance arrangement is as follows:
- £10 million property owner’s liability cover
- 36 months’ loss of rent cover
- Terrorism cover
- Core perils (e.g. fire, flood, subsidence) are covered in the policy
- SIPP/SSAS named as policyholder (or joint policyholder where applicable)
- The total sum insured value is based on a reinstatement value as required by your chosen insurer
If you make your own insurance arrangements it is important that Talbot Muir Trustees are provided with copies of the relevant insurance schedule and written confirmation the policy is in place. We will require confirmation on an annual basis that cover has been renewed. Cover must be in place at exchange of contracts, and completion will be delayed until these documents are produced.
9. MEES
Since 2008, certain properties have needed to have a valid Energy Performance Certificate (EPC) before they are sold or let.
From 1 April 2018, the Minimum Energy Efficiency Standards (MEES) meant that a lease for a property in England or Wales will only be granted or amended if the property has an energy performance rating of A to E, or if the property 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. You 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 you to tell us before the exemption ends how you will achieve the minimum rating. If you can achieve the minimum rating by completing renovations or improvement work, we will only consider buying the property once the works have been completed.
We recommend that you consult with a qualified EPC Assessor should you have any concerns regarding your property meeting MEES regulations now and in the future.
Further detailed information on Minimum Energy Efficiency Standards can be found on the Government’s website.
10. Completion
The Solicitor will refer any matters for consideration to the administrator managing the SIPP in the first instance. The administrator will liaise with the adviser or directly with the client to resolve any concerns so the purchase can proceed.
11. Post-completion
Once the property has completed the administrator will commence invoicing rent to the tenant as directed by the lease.