How to hold business premises in a Sipp

  • Describe how buying a property with one's Sipp works
  • Identify how one gets insurance for the property
  • Describe some of the risks associated with buying a property with a Sipp

Taking you through the technical part

Essentially the technical process revolves around the purchase of the property by the Sipp provider – whether that is from the business owners (where they already own the business premises outright) or a third party.

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Each purchase will of course have its own circumstances.

But the basics remain largely unchanged and the following are some of the key steps which typically feature when a business premises is being sold into a Sipp.

Getting the ball rolling

The process of the Sipp provider purchasing the property will typically take around 8 to 12 weeks (where no borrowing is required to fund the purchase) or 12 to 16 weeks where there is borrowing.

However, turnaround times can be affected by circumstances, needs and challenges.  

For an adviser working on behalf of a client, the first step of the property transaction is to ask their Sipp provider to either set up a new Sipp for that purpose or begin the process with an existing Sipp.

The provider should be told about the planned property transaction at the earliest opportunity as its consent is needed for the client to enter into any agreement to buy a property.

If for some reason the Sipp provider is unable to purchase the property, the client could be personally liable for any agreement entered.

The paperwork

Once the provider is engaged, the adviser and client supply a completed property questionnaire covering details such as the property description, its VAT status, the source of any borrowings and which other professional parties will be involved.

The Sipp may use a bank loan to help fund the purchase.

Where that is the case the terms should have been agreed with the relevant lender by this stage.

After reviewing the questionnaire and the funding situation, the Sipp provider can approve the proposal or request any further information needed.

Once satisfied, they will then issue instruction letters to the surveyor, solicitor and (if a loan is needed) the relevant bank.

Other parties

The report and valuations for the property will come from the surveyor, giving the open market value, the market rental value and insurance reinstatement value.

With some properties there may be factors that require a separate environmental survey to be carried out.

Meanwhile the solicitor provides a report on the property title and any existing lease to ensure that it’s ‘clean’ - there are no incumbencies, such as securities already against the title - valid (the description matches the valuation report and title plan) and marketable, in that the property would be re-sellable if needed.

There is an additional stage in the process if a bank loan is used towards the purchase.