Caitlin Southall, senior marketing executive, Curtis Banks highlights the importance of using the right solicitor in SIPP commercial property transactions.
In principle, the purchase of a commercial property via a SIPP is very similar to the personal purchase of a house. There would likely be negotiation of a purchase price via an estate agent, a valuation would be obtained and legal due diligence would be undertaken before completing on the purchase with the ownership transferred to the new owner. Much the same as a house purchase, a solicitor or legal professional would be appointed by the purchasing party, to undertake due diligence and identify and raise any legal issues that may need, mitigation additional consideration or that may generate concern. SIPP commercial property transactions are nuanced however, with additional requirements and regulations to address and as such, the appointment of the right professional is critical.
Clients may have been looking for the right commercial property for their own company or for investment purposes for a number of years, and it is therefore so important that clients choose the right professionals to act in a transaction, to ensure that the transaction proceeds as smoothly as possible, whilst also ensuring that the right outcome is achieved.
However, there are additional requirements, regulations and considerations for a SIPP purchase that are perhaps unique to a pension transaction. The regulations carry with them nuances that can cause confusion for professionals who are perhaps unfamiliar with pension transactions. For example, it is common in the industry for specific liability limitation provisions to be included in legal documentation to protect the SIPP in the event of default.
Selecting a solicitor
So, what is the process for selecting a solicitor? Some clients may already have solicitors that they are familiar with from personal or business transactions. Others may choose to select a solicitor from a provider’s panel, if one is available. Selecting a firm from a provider’s panel may result in a fixed pricing structure, along with the benefit of a pre-existing relationship where provider risk profiles and requirements are fully understood.
But long gone are the days where you need to select a solicitor close to home, with technology enabling us to communicate and keep in contact wherever we live, the local factor has become of far less importance, with clients open to looking further afield when it comes to selecting a solicitor.
Qualified and regulated
It’s important to ensure that legal professionals are appropriately qualified and regulated before appointing them to act on a transaction. You can do this via the relevant governing body website (for example, the Solicitor Regulation Authority), and there are alternative regulatory bodies for Scotland and Northern Ireland.
Dealing with Property within a pension environment is complicated. An experienced and communicative solicitor, who is extremely aware of the risk profiles of Pension Operators and Trustees, can make the legal process less demanding for the client, proving peace of mind throughout. Ultimately, the aim of all parties associated with the transaction is to understand and mitigate any risks to reach the best outcome possible.
There is, however, a basic checklist that clients should raise with a solicitor before instructing the SIPP to appoint them, including: ‘Who will be responsible for managing my case and what is their relevant experience? How are fees calculated and charged to clients? Fundamentally, the acquisition of a commercial property via the SIPP differs from a commercial transaction on the open market, so making sure that a suitably experienced solicitor is appointed can help in terms of overcoming issues, costs and time.
Considering which solicitor to appoint in a SIPP transaction should form part of the client’s own due diligence prior to purchase. It is worth checking individual pension providers as to whether they have a panel of experienced professionals that could act in the transaction, even just to use as a cost comparison against another solicitor who isn’t on their panel.
For all transactions, but particularly complex, or time pressured transactions, the experience and efficiency of the appointed solicitor will have a direct impact on the eventual outcome.
