Property pension investment made easy

Posted on: November 11th, 2019

In our experience, financial advisors and beneficiaries can have concerns about putting a commercial property into their pension scheme. Below you’ll find some of the most common questions we are asked when it comes to property pension investments – and how we work with our clients to find the best solutions for them.

Q: Don’t pension transactions take much longer than normal property transactions, which is frustrating for everyone involved?

Pension transactions can take longer, but with any tax efficient scheme there are always additional hoops to jump through. Using lawyers who know a pension trustee’s requirement will remove any delays. For example, papers will not be sent to pension trustees without their key requirements having been included, so that they then need renegotiating. We have standard documents catering for pension trustee requirements, so time consuming drafting is not required. Our experience means that we can identify issues for the trustees early on, and resolve those before they become problematic, rather than the trustees noticing them at a critical stage in the transaction. All this will save time and money.

Q: I need a transaction started now to avoid losing the deal, but the trustees aren’t prepared to instruct lawyers yet. Is there anything I can do?

A: Yes – we can start work before the trustees instruct us, on the basis that the beneficiary acknowledges that they will pick up any fees if for some reason the pension fund cannot accept the property. When the trustees are ready to instruct us, we’ll just continue with the process we’ve already begun – there is no duplication of time or fees involved.
For each day that we are instructed by you before the pension fund instructs us, we can be one day further into the transaction, saving that time when the instructions from the trustees do come in. This results in significantly reduced timescales for completion.

Q: The trustees have instructed lawyers, but we feel like we don’t know what is going on!

A: Pension transactions are made more complex by the number of parties involved in them; you have trustees, beneficiaries, financial advisors and lenders all playing a part. At Coffin Mew, we are used to these transactions and strive to keep you informed throughout the process.
We have a policy of open communication with all parties, and offer our direct dial telephone numbers to everyone, as long as there is no conflict of interest. This allows you the freedom to be involved as much or as little as you like.
We appreciate that sometimes you will have a vital piece of information, which may help the transaction progress more swiftly. You can leave the transaction with us to progress, or ask us to keep you informed along the way. We will work with you to make sure that everyone knows what is going on, and that the deal is completed as quickly as possible, avoiding any unnecessary stress, concern or feelings of doubt.

Q: The property we are looking to transfer is already owned by us, and we don’t want to pay for a full report on title that we then have to read. Is this ok?

A: As long as the pension trustees are in agreement, we can prepare a simpler version of the report, which just states where the issues are and identifies the key important points, without explaining everything that affects the property. The rest of it can be left with us to deal with, saving everybody time and hassle.

Q: It feels like pension property transactions are made more difficult by the requirements of lenders, is that true?

A: Using a lender who is confident in dealing with pension property transactions will help to make things easier, as will instructing a law firm who has a strong understanding of these types of transactions.
We understand the lenders’ requirements for documentation, as well as the rules that restrict pension trustees as borrowers – something that other law firms may not be familiar with. If the paperwork and procedures are right at the start, the transaction will proceed more quickly and smoothly.

Q: I think I could benefit from putting property into a SSAS or SIPP, but I’m restricted from doing so because there is a residential element to the property. Is it possible to work around this?

A: If part of the property is residential, then we can usually split the interest in the property, so that the commercial part of the premises can be held within the fund.
Bear in mind that a long leasehold interest in the commercial part of the premises will need to be granted. The residential and freehold parts of the building will normally be held by the beneficiary of the pension scheme.
The procedure does involve some legal work, but the tax advantages can make it worthwhile. We can also often suggest tax efficient ways to structure this type of transaction.

Whatever your concerns around a property pension transaction are, we are always happy to discuss matters with you, and will do everything we can to help work around a problem. We can take care of everything from structuring the transaction before a property is purchased, right through to dealing with property management issues once the property is within the fund.

Please contact a member of our Commercial Property team at any time – we will always do what we can to help.