SSAS Property Due Diligence: What Trustees Must Investigate Before Buying

Why Due Diligence Matters More for SSAS Trustees

All commercial property investors should conduct due diligence before buying. But SSAS trustees have an elevated duty of care: they are not investing their own money — they are investing members' retirement savings. The Trustee Act 2000 requires trustees to exercise "such care and skill as is reasonable in the circumstances," which in a property investment context means comprehensive pre-purchase investigation.

Poor due diligence can result in:

• Overpaying for a property with undisclosed structural or environmental issues
• Acquiring a property with a weak tenant whose failure leaves the scheme with a void
• Unknowingly purchasing a property with title defects that impair resale
• Making an investment that HMRC subsequently challenges as an unauthorised payment

The professional team assembled for the transaction — solicitor, RICS surveyor, accountant — conducts much of the formal due diligence. But trustees should understand what is being investigated and engage actively with the findings rather than simply signing off whatever the professionals present.

Legal Due Diligence

Title Investigation

The solicitor's primary role is to investigate the vendor's legal title to the property. Key matters include:

• Freehold vs leasehold: Freehold is preferable for SSAS investments where possible. Leasehold properties require assessment of the remaining term, ground rent, service charge obligations, and any alienation restrictions
• Restrictive covenants: Historical covenants may restrict the property's use or development potential. Their enforceability and impact should be assessed
• Easements and rights of way: Third-party rights over the property (access rights, drainage easements) should be identified and their impact understood
• Charges and encumbrances: Any existing mortgage or charge over the property must be discharged on completion. The solicitor confirms this is being arranged

Planning and Environmental

The solicitor commissions planning and environmental searches. Trustees should review:

• The property's planning use class (is it compatible with the intended use?)
• Any planning conditions or enforcement notices
• Environmental contamination risk (particularly for industrial properties)
• Flood risk (affects insurability and mortgage availability)

For SSAS purposes, environmental contamination risk deserves particular attention. A heavily contaminated site may require remediation that significantly reduces the property's investment value — or may not be insurable, creating mortgage and letting problems.

Physical Due Diligence

Structural Survey

The RICS valuation will comment on condition, but trustees may wish to commission a separate structural survey (a building survey or schedule of condition) to fully understand the property's physical state. This is particularly advisable for older buildings, properties with flat roofs, or any property where visible defects are apparent.

Identifying defects before purchase allows trustees to:

• Negotiate a price reduction reflecting the cost of required works
• Apportion repair liability appropriately in the lease to the tenant
• Avoid acquiring a property that requires immediate capital expenditure

Services and Infrastructure

Confirm that the property has adequate utility connections (electricity, water, gas, telecommunications) for its intended use. For older industrial buildings, three-phase electricity supply and power capacity may be critical for manufacturing tenants.

Financial Due Diligence

Rental Income and Yield

If the property is tenanted, review the current rent against the RICS surveyor's opinion of open market rental value. Key questions:

• Is the current rent above, at, or below open market rental value?
• When is the next rent review, and in which direction can it move?
• Is the lease full repairing and insuring (FRI), or does the landlord bear maintenance costs?

If the property is vacant, obtain the RICS surveyor's view on achievable rent and realistic letting timescales. A void period of 6-12 months before a tenant is found may be realistic in some markets — the SSAS needs sufficient cash reserves to service any mortgage during that period.

Tenant Covenant Strength

For a tenanted property, the tenant covenant is critical. Assess:

• The tenant's financial strength (company accounts, credit rating)
• The tenant's industry and susceptibility to economic downturns
• Any personal guarantees or rent deposits in place
• The remaining lease term (short-term leases create higher void risk)

Matt Lenzie notes: "SSAS lenders pay close attention to tenant covenant strength because it drives the reliability of rental income that services the mortgage. A property let to a national retailer or a blue-chip company on a long lease will attract better mortgage terms than a property let to a small private company on a short lease."

HMRC Compliance Due Diligence

Confirming the Property Is Not Residential

The single most important HMRC compliance check for an SSAS property purchase is confirming that the property is wholly commercial. This may seem obvious for a warehouse or office, but there are edge cases: some mixed-use properties include residential units (flats above shops), some guest houses and hotels shade into residential classification, and certain agricultural properties include residential dwellings.

The solicitor and RICS surveyor should specifically confirm the property's classification. Any residential element — even minor — requires specialist advice before proceeding.

Connected Party Compliance

If the SSAS is purchasing from the sponsoring employer or a connected party, additional compliance checks apply:

• The RICS valuation must confirm the purchase price reflects open market value
• The pensioneer trustee must specifically approve connected party transactions
• The solicitor should confirm that the transaction structure does not constitute a prohibited transaction under pension legislation

VAT Compliance

Confirm whether the property has been opted to tax for VAT purposes. If so, the purchase price will include VAT, and the SSAS may need to make its own option to tax or satisfy the Transfer of Going Concern conditions. The scheme's accountant should advise.

The Due Diligence Checklist

Before authorising exchange of contracts, SSAS trustees should be satisfied that:

• The RICS valuation confirms open market value at or above the purchase price
• The solicitor has reported on title with no material unresolved issues
• All searches have been received and reviewed
• The property is confirmed as commercial (non-residential)
• Any connected party compliance issues have been addressed
• The tenant covenant has been assessed and is satisfactory
• The lease terms have been reviewed and are acceptable
• The physical condition of the property is understood and priced in
• The VAT position has been addressed
• The mortgage offer is in place (if borrowing)
• The pensioneer trustee has given formal approval

"Due diligence is not about finding reasons not to buy — it is about buying with full information. Most issues identified in due diligence can be resolved, priced, or managed. The ones you do not find before completion can come back to haunt the scheme for years."

— Matt Lenzie, Former Banker & Corporate Finance Partner

Key Takeaways

• SSAS trustees have an elevated duty of care in due diligence as fiduciaries of members' retirement savings
• Legal due diligence covers title, searches, planning, and environmental matters
• Physical due diligence may include a structural survey beyond the RICS valuation
• Financial due diligence must assess rental income, yield, and tenant covenant strength
• Confirming the property is non-residential is the most critical HMRC compliance check
• Connected party transactions require additional HMRC compliance steps and pensioneer trustee scrutiny

Need specialist SSAS property finance? Visit our SSAS property finance page or contact our team to discuss your requirements.