Chambers property structures
By David Webster, Partner in the Corporate and
Commercial Team at Russell-Cooke
During the last 10 to 15 years an increasing number of Chambers have sought new premises which better suit their needs.
In addition to this move to more modern facilities, many have decided that, rather than renting from a third party landlord,
Chambers should acquire a property outright
I
n a recent edition of the
Barrister, my partner Scott
Leonard described a structure
commonly used to facilitate this
type of acquisition - a bare trust
/ nominee arrangement where legal
title is held by one or more trustees
(commonly individual members of
Chambers, or companies formed for
the purpose and operated by members
of Chambers), on trust for those
members of Chambers who accept
responsibility for funding the purchase.
This article considers some of the
matters that need to be attended
to throughout the lifetime of these
arrangements.
Accounting records
It may seem obvious, but it is crucial
to keep up to date, detailed accounting
records and to have a clear “audit
trail” of monies going in and out of the
structure.
This is not necessarily as simple as it
sounds. These arrangements cannot
be treated in the same way as, for
example, a company which has its
own assets and liabilities – all income
and outgoings have to be apportioned
directly to the beneficial owners in
their relevant shares. A detailed
spreadsheet needs be set up at the
outset, recording the interests of all
participants including their liability for
borrowing. This needs to be actively
maintained.
In most cases one would expect
there to be relatively few, and fairly
predictable, movements on a trust
bank account, so it can be a fairly
mechanical exercise – income will
wish to assign the lease to a
service company. In considering
whether to consent to the
assignment the trust will need to
protect its position in the same
manner as it would do with an
unconnected tenant. This may
mean that rent deposits and/or
personal guarantees are required
as a condition of giving consent.
predominantly consist of quarterly
rent payments, whilst outgoings will
primarily be payments to mortgage
lenders, together with more minor
costs such as adviser’s fees.
However, records will also need
to be updated to deal with more
“exceptional” items, for example
changes in ownership of shares
and related apportionments, or any
overpayment of mortgage borrowing by
a particular investor. Commonly these
accounting functions are outsourced
to the trust’s accountants or the SIPP
provider.
Separation between landlord and
tenant
It is essential to maintain a separation
between Chambers as tenant and the
Trust as landlord. One of the benefits of
acquiring Chambers’ premises is that
members become their own landlord.
Nonetheless, all dealings between the
trust and Chambers must be on arms’
length commercial terms. This is not
simply a theoretical legal concern,
failing to act in this way is likely to
breach pensions legislation (assuming
some mem