Commercial property
Commercial property expertise
Commercial property is a popular investment for SIPPs and SSASs, and we have the expertise and experience to provide your clients with a complete property investment journey.
We manage in excess of around 6,000 properties on behalf of thousands more clients. We pride ourselves on our property heritage and the breadth of our experience which dates back to 1971, and are here to provide your clients with a complete end-to-end property journey.
The breadth of our experience in property purchase, on-going management and SIPP administration ideally positions Curtis Banks to provide for your client’s SIPP property needs. We have developed relationships across the property industry and can provide access to a range of support solutions.
Contact us today to find out more.
For new commercial property enquiries
For new commercial property enquiries, please contact Nick Giles, Sales Executive:
nick.giles@nucleusfinancial.com
For existing Curtis Banks clients, please contact us on 0370 414 7000.
We are happy to undertake a fee free initial assessment of a commercial property, prior to establishment of a SIPP with us. All you need to do is send us details of the property your client is looking to acquire via email, or give us a call.
We are able to assess properties using an online sales link or marketing/auction particulars, or alternatively just an overview of the property sent to us via email, or over the phone. The more information that you can provide, the better.
Any assessment provided will be subject to our usual due diligence.
Individual property purchases
The purchase can be funded by transfers, contributions or disinvestments within the SIPP, or borrowing from a high street lender (or a combination of the two). Further information about borrowing to facilitate commercial property transactions, please refer to our Property Guide.
Group purchases (syndicates)
A group purchase is where the entirety of the property is acquired by more than one Curtis Banks client. The ownership shares in the property do not have to be equal between the syndicate members. Funding for this type of transaction can be by way of cash in the SIPPs, borrowing from a high street lender, or a combination of the two. If a number of clients require borrowing to fund the purchase only one loan agreement is required and we internally apportion liability for the loan between the various SIPPs.
Tax advantages
Commercial Property Investment
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.
Risk considerations
Commercial Property Investment
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.
Allowable property
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. Find out more below.
Frequently asked questions
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 the client 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, the customer 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 the customer is successful at auction, the SIPP would pay the deposit monies (usually 10% of the purchase price) to the auctioneer, and the customer 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, the customer would bid for the property in their personal capacity, and (assuming they were successful at the auction) they would personally pay the deposit and exchange contracts in their 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, the customer 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, the customer would need to be able to pay for the property and transaction costs themselves.
The customer 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 the client paid at auction.
- Assuming that the property purchase price is in excess of the Stamp Duty Land Tax (SDLT) threshold (currently £150,000) then the customer 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 your local business development manager, who can provide a fee free assessment of a proposed SIPP property investment.
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.
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).
There are two ways in which property we fully own may be held.
For Your Future SIPP or legacy Suffolk Life clients:
Suffolk Life Annuities Limited is a subsidiary company within the Curtis Banks Group and will be the legal title holder of each property.
If the property is to be bought by Suffolk Life Annuities Limited we will be the only legal owner of the property and will be registered at the relevant Land Registry.
For all other plans:
We will hold the property on trust for the SIPP, through one of our trustee companies.
The trustee company will depend on the type of SIPP product that your clients have. Please contact us if you need confirmation of the trustee company.
In certain circumstances, clients may have to pay VAT on the purchase price of a property.
Clients can usually claim the VAT back (as long as the tenant is not exempt from paying it), but until then they will have to pay it from their SIPP. We will ask our solicitor to confirm if VAT has to be paid, so we can agree the appropriate action with you and your client.
Sometimes, the sale or purchase of property may qualify as a ‘transfer of a going concern’ (TOGC). This means that VAT may not have to be paid on the purchase price or charged on a sale. It is likely that professional advice from a qualified VAT adviser will be required on whether the TOGC conditions are met. The client’s SIPP will have to pay for this advice.
If the seller of a property has not chosen to charge VAT, the client’s SIPP will generally not have to pay it. There are some exceptions to this, for instance new-build properties. So, unless there are plans to substantially refurbish the property (where the contractor’s costs include VAT), VAT will not typically be payable.
For joint purchases the process may differ, and professional advice will be required from a qualified VAT adviser as part of the purchase due diligence.
Throughout a property journey, your clients 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. Clients can choose their 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. Clients can still choose their own RICS accredited valuer and are not restricted to the panel. However, by working with a Panel Firm, they 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, clients can still choose their own qualified energy assessor and are not restricted to the panel. However, by working with our Panel Firm clients will benefit from fixed pricing and agreed service level agreements.
Clients can use their SIPP to build, develop or renovate property in the pension, by using funds from their SIPP or arranging borrowing. The property/land must be owned in full or part by the client’s SIPP before the SIPP can pay for any works.
You can find out more about our requirements for development works in our useful factsheet.
While we hold property within your client’s SIPP, we will need you and your clients 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 their 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 the client’s instructions. For properties owned on behalf of a group of individuals the client and their syndicated members will nominate a lead member for us to correspond with and to supply decisions.
Valuations
Your clients may want to ask for formal valuations of their property to help with financial planning. There will also be times when we will need valuations, either as a result of pension regulations or due to the terms of the lease. Examples of when we and your clients may need valuations include:
- When they take their pension benefits or, if they are already in capped drawdown,
- when they review their income limits (they will need to do this every three years up to the age of 75 and every year after that);
- In line with the terms of insurance – Please see our property insurance notes.
- When renewing or taking on leases; and
- At rent reviews (in line with the terms of the lease)
Your client can nominate a valuer to carry out the valuation report. If they don’t tell us which valuer they want to use, we will appoint one from our panel of property professionals. As the legal owner of the property, we will need to instruct the valuer. Once we have a valuation, we can use it for pension purposes for up to three months.
The cost of any valuations will be met by your client’s SIPP. Please contact our Property SIPP Servicing Team if you have any questions.
SIPP Funds
It is your client’s responsibility to make sure there are enough funds in their SIPP to meet expenses such as mortgage payments, VAT, other costs (including service charges, business rates, utility bills and insurance) and their SIPP fees. If funds are not available your client will need to sell other assets in their SIPP, make a contribution to their SIPP (if allowed), or transfer funds from another pension plan. Please see the SIPP’s Key Features for full details.
Ordering the sale of your property
If your clients do not make cash available to meet meet costs that they have been told about, we may need to force the sale of the property. If this happens, we will follow our Order of Disposal Policy (you can ask us for a copy of this). We will always carry out these sales by auction so that the property is sold quickly and you do not run up further expenses.