There are some peculiarities surrounding SIPP transactions which differ from the usual commercial investment purchases and disposals, and this article aims to shed some light on these issues.
Who is the client?
This is one of the more confusing elements of SIPP transactions. If a member decides to purchase a property into their SIPP, they cannot contact the solicitor direct with instructions as would happen in the course of a usual investment purchase - the instructions must come via the SIPP provider.When a SIPP provider instructs our firm, the SIPP provider is the client, rather than the SIPP member. This means that:
- we must take instructions from the SIPP provider, rather than from the SIPP member and
- we would only usually provide advice on the legal issues surrounding the transaction to the SIPP provider, rather than to the SIPP member.
This can be frustrating for members who view the property as being their own property. It is, of course, the member's money in the SIPP fund which is being used to finance the transaction, however we are acting for the SIPP provider, and not the SIPP member.
Where the tenants are connected parties to the transaction - e.g. where the member of the SIPP owns a company which is to be a tenant at the property being acquired - this can become even more confusing. In such instances, we cannot advise the tenant of the property, as this would result in a conflict of interest. Separate representation is therefore usually obtained by the tenant.
Panel vs. self-appointed solicitors
Some SIPP providers have a panel of solicitors that they recommend to SIPP members. The Morton Fraser team has a wealth of experience in transactions involving SIPP providers as we currently sit on the panel of several SIPP providers.
Using one of the panel solicitor firms, as opposed to a self-chosen solicitor, to act for your SIPP in relation to a transaction is, of course, a personal choice. However, it is worth bearing in mind that there are major benefits to instructing a panel solicitor as opposed to a self-appointed solicitor to deal with your SIPP transaction.
A panel solicitor will be familiar with the peculiarities of SIPP transactions and that particular SIPP provider's processes and requirements. The panel solicitor can therefore often assist in providing a streamlined service and in turn help to minimise costs. Using a panel solicitor will usually result in lower legal costs as a result not only of the streamlined service and expertise of the SIPP provider's solicitor, but also because some providers charge a fee for using non-panel solicitors.
Timing issues for signing documents in SIPP transactions
When documents are to be signed by the SIPP, these often need to be signed by both the SIPP member and the SIPP provider. This can cause delay if timescales are tight, and so here at Morton Fraser we tend to:
- offer the SIPP member the option of our emailing the document to them and them printing it off at home - to save posting time and
- then suggest that the member sends the document direct to the SIPP provider (rather than back to us), further to minimise delay.
SIPP providers usually need to be the last party to sign legal documents. This is another quirk to keep in mind when in the midst of a transaction in terms of timescales. The quicker the member signs the documents and passes the document either back to the solicitor or on to the SIPP provider, the quicker the SIPP provider will be able sign the document. SIPP providers often have internal sign off processes to go through before signing documents, which can also cause delay. Usually, the minimum turnaround time on a document to be signed by a SIPP provider is two to three days.
Limitations on liability
SIPP providers insist on standard limitation of liability wording being inserted into all legal documents. This limits the liability of the SIPP provider to the extent of the assets contained in the individual's SIPP.
If you require any further information on any aspect of commercial property transactions involving SIPP providers, please do not hesitate to get in touch with us.