Commercial property purchase case study

Mr & Mrs Williams run a successful florist as a partnership from a busy rented high street location.

They have outgrown the existing premises and are now considering purchasing their own business premises. They have been advised that they can use their pension funds to achieve this.

The facts

• Mr & Mrs Williams each have £100,000 in their pension funds
• The proposed shop is valued at £240,000 which can be purchased using their personal pension funds
• They will each need to establish a full asset Dentons SIPP
• Their SIPPs can each borrow up to an additional £50,000 as this is within borrowing limits. This can be used to meet the purchase price and other associated commercial property purchase costs such as solicitor and surveyor costs, Stamp Duty Land Tax (SDLT)  in England and Wales, and land and buildings transaction tax (LBTT) in Scotland, and VAT, if applicable.

The process

• Mr & Mrs Williams complete Dentons Commercial Property Questionnaire
• Dentons checks the details to ensure the property is acceptable and there are sufficient funds to cover the property purchase and associated expenses
• Mr & Mrs Williams confirm the purchase price the SIPP will have to pay
• They each establish a Dentons SIPP and arrange for the funds from their personal pensions to be transferred
• Dentons needs to be informed of the solicitors they wish to use
• Mr & Mrs Williams arrange a commercial mortgage for their SIPPs through their bank which will help to fund their property purchase
• Once the 30-day mandatory transfer cancellation period has expired, the funds from the SIPP, along with the agreed mortgage loan, can be used to complete the commercial property purchase
• Mr & Mrs Williams arrange a valuation with a surveyor to provide evidence of the rental income that should be paid by their company into their SIPPs. The surveyor must be MRICS or FRICS qualified who is a Registered Valuer.
• The solicitor draws up the lease for the rental of the florist shop to the partnership
• The SIPPs then pay for the property and the solicitor’s fee is paid by the SIPPs.

The result

• Once in the commercial property Mr & Mrs Williams pay the rental income to their SIPPs which is applied to each member’s cash account on a 50:50 basis and is used to pay off their respective mortgages.