The market for lending to superannuation fund trustees, which opened up after changes to superannuation legislation in 2007, has proven to be a difficult one.The head of technical services at MLC, Gemma Dale, said financial planners report that in many cases super fund trustees want the loans for purposes that the lending rules do not allow.Most trustees apply for loans to buy property but then find they are frustrated by the contentious "single asset" rule from sub-dividing properties, building on vacant blocks or even renovating.The 2007 amendment to the Superannuation Industry Supervision Act established the right of super funds to borrow to invest in any asset that they would otherwise be allowed to buy outright. In May last year the Government made a further amendment to provide greater certainty around borrowing arrangements. The amendment introduced the concept of an acquirable asset, which is defined as any asset that a super fund is otherwise not prohibited from acquiring. Where the amendment varies from the rule established in 2007 is in specifying that assets that can be acquired under borrowing arrangements are restricted to a "single acquirable asset".Dale said: "If the super fund uses borrowed funds to acquire vacant land, the land is the single acquirable asset. If you put a building on it you have to treat that as another asset. The rules do not allow for a single loan to fund two assets."Renovations also present a problem, Dale said. Improvement to real property is defined as a replacement and may not be permitted. This is a confusing area because of the uncertainty about what constitutes an improvement and what should be regarded as maintenance. Dale said: "Regular capital improvements are required to keep properties commercially viable. This prohibition makes the whole proposition potentially unattractive."A super fund making a claim for damaged property after a flood or storm would not be able to use the insurance payout to re-build the dwelling. The insurance proceeds would have to be used to pay out the loan.Dale said that lending to super funds has remained a small-scale, bespoke activity as a result of these complications. No one has been able to develop a successful mass-market solution.She said lenders were also wary of some of the other peculiarities of super loans. While the loan is being repaid the asset must be held in trust with a security trustee; the super fund has a beneficial interest in any income, interest or capital gains enjoyed from the asset. When the loan is paid out, ownership can be transferred to the super fund. The existing assets of the fund have to be protected from loss if the loan goes bad. Loans must be non-recourse.