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Joint Property Purchases Through a SIPP or SSAS

Purchasing a property jointly through a SIPP or SSAS arrangement offers benefits but can cause headaches.

Typically such an investment might include the scheme member, the member’s business and independent third parties. Issues arise when there are incompatible requirements between the parties.

The complications tend to arise when borrowing is brought into the equation by one party or both. When taking a legal charge over the property the bank needs to ensure that any sale proceeds are proportioned across the parties involved.

The bank and the property trustees need to formalise an agreement. It should state that it is their mutual intention that only the proceeds of the sale of the property of the pension scheme are to be utilised by the bank for the repayment of the liabilities of the pension borrowing.

The bank will need to agree that if it sells the property, pursuant to its powers as mortgagee, it will divide the net proceeds into separate funds which represent the share of the property held by each of the pension schemes and other parties concerned.

This will be dealt with by the way of a cross liability letter which protects the pension fund assets in a forced sale situation particularly where the value of the property has significantly fallen and means the bank is not able to use pension fund monies to repay other parties’ debts.

An example:

The property is valued at £200k.

The pension fund purchases half by way of £70k fund and a £30k mortgage.

The company purchases half by way of a £20k deposit and £80k of mortgage.

If the property is then sold under repossession for £120k the pension fund will get £30k after the repayment of its debts, made up of £60k of proceeds less the £30k mortgage.

The company will still owe the bank £20k – the £60k proceeds less £80k mortgage. Without the cross liability agreement the bank may well have taken its full £110k of debt leaving only £10k for the pension fund. This would result in unauthorised payments.

It is our recommendation that you speak to the bank at the earliest opportunity. If you are considering joint property purchase without the requirement of borrowing involved, this is a more straightforward transaction.

For further information, please speak with your usual financial adviser or alternatively contact Kerry Houghton on 01772 550614 or via email

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