A member’s SIPP may borrow to assist in financing a property purchase and development. The main conditions for such borrowing are shown below:
- Borrowing can be used to fund the purchase and development of commercial property.
- The maximum that can be borrowed is restricted to 50% of the funds net assets (less any existing borrowings).
- The rental income produced by the property must exceed the loan repayments (including capital and interest).
- Where a number of members are buying property together, each member may borrow a maximum of 50% of their own fund’s net assets.
- The total amount of borrowing will ultimately be determined by the lending institution used.
- The loan is made to The GPC SIPP Re: Members Name, not to the member.
- The Lender is given First Legal Charge on the property as security. GPC SIPP Ltd and GPC SIPP Trustees Ltd include a Limitation of Liability clause in all documentation, which limits its liability to the value of assets held by the member’s SIPP account.
- Any loan must be repaid when the property is sold.
- Loans should be, in general, taken out on an interest and capital repayment basis.
GPC SIPP Ltd will arrange for the appropriate amounts to be paid to the lender from the SIPP bank account. Subject to there being sufficient funds available within the SIPP account, loan repayments will continue to be made even if rent is not being collected (e.g. due to refurbishment). In the event that insufficient funds are available in the SIPP account to meet the loan repayments when they become due, the Lender would be entitled to realise their security and sell the property to repay the mortgage. For this reason we ask that funds totalling three months rent should be available in the SIPP Bank Account.
GPC SIPP require the following documentation from a Lender
- Facility Letter
- Legal Charge
If the surveyor’s valuation report is addressed to the Lender and not GPC SIPP Ltd, then we shall require a letter from the surveyor which will allow us to rely on the surveyor’s report.