SIPP: Bizarre situation

SIPP: Bizarre situation

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I deal with the tax return of my client's SIPP. The main asset is a small office building, which is let to a third party. The latter has got involved in a dispute with a neighbour about parking in the road outside. There has been litigation, which the tenant has lost so far, and which has cost him £50000 in legal fees to date. The case is now going to a higher court, and the neighbour's solicitor has -without warning - registered a charge on the SIPP's freehold in respect of legal fees up to £100000, assuming that the tenant loses and refuses to pay costs and damages. I am told that this is quite common and is purely protective. However, it seems highly inequitable in relation to the pension fund, which is not in any way involved in the dispute. What would happen if the SIPP were to sell the property now? Would it have to forfeit £100000 from the proceeds, or would the liability carry over to the buyer? Are there any tax or VAT implications for the SIPP?
Andrew

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By philrob
01st Apr 2009 16:00

nice to know but...
Thanks for the update,

Out of interest, who is it protecting?

The SIPP - definately not!

If it can't be enforced then it was a waste of the neighbours money, if it can be enforced the SIPP should be very worried indeed.

Phil

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By User deleted
31st Mar 2009 11:17

Already done!
The SIPP's legal adviser says it's all fine, very common and purely protective.

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By philrob
30th Mar 2009 16:20

Get proper advice ASAP!
Take proper advice pronto.

At face value the dispute is between tennant and neighbour and therefor the charge on the freehold should be rejected - I can't see how the landlord can be responsible for the debts of the tennant - BUT the law is stupid sometimes and might permit this to happen.

It could also be that a court has issued the order believing it to be owned by the tennant.

It is hard to speculate, but a decent commercial/property lawyer should be able to advise the correct strategy going forward.

Please let us know how it turns out.

Phil

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