We generally do not have a predetermined policy as to what is acceptable and what is not. There are a number of factors which could result in a transaction not proceeding. Some of these are specific pension law prohibitions. Others are common sense where neither we nor your client as the underlying investor would want to buy the asset.

Property liabilities
These can arise from provisions in the title deeds or things which the solicitor acting on the purchase discovers by making the usual pre-contract searches and enquiries.

One liability which is of primary concern to SIPP administrators is environmental liability. Under environmental law, if a property is legally contaminated, the enforcing authority can serve a notice requiring the contamination to be removed. The basic principle is that the polluter is the person liable but if the polluter cannot be found or if for example he is dead or insolvent, the enforcing authority can turn to other people and at the back of the queue is the owner.

Therefore in an extreme case, the SIPP could have a liability to make good contamination which exceeds the value of the assets for that particular investor. As a result, pension administrators are extremely careful to check environmental liabilities before they sign up to buy a property. Naturally your client as the ultimate investor will not want a property that is polluted.

Connected persons prohibition
This was removed in April 2006. It had placed restrictions on buying an asset into a SIPP into which the client or any ‘connected person’ had held an interest in the preceding three years. Connected persons includes family, controlled companies and business partners.

These restrictions are now removed. However the transaction must be at the full market value.

Adjoining property
If the client or a connected person owns property and want to buy through their SIPP a property that immediately adjoins it, we shall need to be satisfied that the purchase of the new property by the SIPP will not have a material effect on the value of the other personally owned land. This is to ensure that the SIPP is not used in any way that boosts or benefits the value of personal assets.  Cases need to be considered on their individual merits, and we will need valuation advice which will indicate to us whether we can go ahead.