We have extensive experience whether buying property as an investment, for development or for operational use, including the purchase or sale of trading businesses. If any such deal involves the transfer of employees our Navigator team is available to assist with the TUPE and pensions aspects.
We also assist clients executing sale and leaseback transactions to release capital for business expansion or operational purposes.
Whether landlord or tenant, we are able to assist in negotiating lease terms which will reflect the needs of our client and the respective strengths and weaknesses of the parties.
Our national exposure provides insight to market trends throughout the country.
We work with clients on development acquisitions and are able to quickly identify any material concerns which could adversely affect the commercial viability of a project.
We work closely with our colleagues on share and asset purchase/sale transactions, and debt and equity funding deals, providing support on the property diligence and warranty negotiation.
Property funding can take many forms, including the building of a residential or commercial development of any shape or size. Our debt funding team can help clients to negotiate the most favourable funding package and our real estate team works alongside in dealing with property due diligence and property-specific security.
Whether a pension scheme is looking to invest in this class of investment or in specific commercial properties, Vialex can help.
The Vialex real estate team has vast experience of acquisition, and disposal and leasing of commercial property. The real estate & financial services team at Vialex, ensure that the specific governance issues, process, procedures, and controls are observed.
Capital appreciation and rental income in a tax-free environment is attractive. No one wants to discuss the impact of unauthorised payment charges, or HMRC registration, nor The Pension Regulator (TPR) oversight and FCA authorisation stress situations.
There are various pre acquisition checks for pension scheme property investments that restrict some schemes’ options. These focus on areas such as:
Vialex gives tactical and strategic advice and attends to the mechanics of dealing in commercial property or real estate, anywhere in the UK, through our network of law firms.
Let’s look at the advantages, disadvantages, and costs first.
Some or all of the following costs may be incurred if a pension scheme invests directly in property:
Annual costs whilst the property is in the pension scheme
These costs should all be paid by the pension scheme to avoid additional tax charges. It is therefore important that there is sufficient cash over and above the purchase price held within the pension scheme to at least meet these.
The pension scheme governance dealing in commercial property involves additional work over and above the normal process and procedures of buying, selling and managing a real estate investment property.
Good pension governance has to be observed to avoid unauthorised payments. Property managers need to be appointed and the trustee/scheme administrator decision making process observed.
If there is more than one investor or one scheme then investor agreements are a must, (as well as a robust title deed setting out owners’ rights and obligations) and these should be well thought through to minimise the probability of issues at a later date.
The right person must give the investment instructions. The pension investor may believe they are running their own pension arrangement. Vialex will check the position and make sure the correct governance is applied.
Vialex role: As solicitor, we may be introduced to the opportunity by the pension investor, but it is the pension scheme administrator or trustee that will be purchasing the property (or will hold joint title with the pension investor or others) on behalf of the pension arrangement. In this situation it is likely that we would have two clients and we will manage any conflicts of interests appropriately.
The pension administrator or trustee will instruct Vialex. They at least will be our client and all ongoing instructions to the solicitor must come from them, even if originating with the pension investor.
We are required to conduct the usual due diligence involved in purchasing property, including local and title searches and fully report to the client on the title to the property and on any leases in place or to be granted.
This sometimes requires more investigations to be made. The decision to proceed with the purchase will be the pension scheme trustee or administrator, dependent on their risk tolerance and the outcome of the due diligence.
The person responsible for decisions on pension investments has to be satisfied the investment is worthwhile for the pension scheme, the investment strategy in place, and there are resources in place to administer this “real” asset.
The governance decisions will ensure that the risks associated with the investment are within appetite, letting prospects are realistic and any tenant has strong finances appropriate to rental terms of the lease, and is appropriate to the age profile of pension investors where the pension is for a discrete number of pension investors.
The pension arrangement is primarily interested in the pension investors investment for retirement. This can create tension between the short and the long term needs of business owners when they are themselves the pension investor, or at arm’s length to employees.
Vialex will advise on the appropriate decision-making process, evidence on which to make decisions, who should make the particular decision, and any safeguards the decision maker may want to require of the pension investor.
There may be tactical reasons to consider borrowing, whether or not there is sufficient liquidity in the pension arrangement. There are restrictions on borrowing. Pension investments go up and down.
All this is in addition to the normal terms and conditions of commercial lending, and security to lenders to buy real estate.
Vialex is alive to the needs of pension arrangements and restricting liability to the value of the pension arrangement.
Within a pension arrangement, the lease itself should set out key restrictions on the tenant that will determine the lease should the tenant do anything to jeopardise the tax efficiency of the real estate investment.
If anyone owning or letting the property is connected to the pension scheme, then the lease or sale documentation has obviously to be at arm’s length and onerous terms enforced as ‘an arm’s length transaction.’ That is, each party must be acting in their own self-interest and not subject to any pressure or duress from the other. This might mean for example instructing a valuer when in other circumstances purchase price or rent reviews might be done “on the nod.”
The lease itself should set out key restrictions on the tenant that will determine the lease should the tenant do anything to jeopardise the tax efficiency of the real estate investment.
Vialex can assist with all of this.
One always expects a property manager to enforce the lease terms. If the property manager is the pension investor, they must ensure that the lease is enforced as it stands, payments (rent, insurance, repairs, charges) are received when due, and nothing done (or omitted to be done) in terms of the lease.
It might be that the property manager will work out how best to deal with gaps between tenants.
Vialex can advise the pension trustee or administrator on the terms it ought to have in place and the property manager on conducting their job as they are supposed to do.
Those undertaking property development outside a pension arrangement can decide to not take advice from professionals; but the persons responsible for running the pension arrangement must ensure that they are acting, and can evidence that they have acted, in the best interests of the pension investor.
This will mean the costs of development may be more than first anticipated.
Vialex can make sure that the contracts and relationships are managed appropriately to the needs of the pension arrangement, and position of the property manager.