By Sinead Cruise

LONDON (Reuters) - Some of Britain's biggest quoted property companies have joined forces to lobby the government for the right to part-pay mandatory dividends with stocks in an effort to stockpile cash ahead of the next property boom.

Heavyweights including Land Securities (LAND.L: Quote, Profile, Research), British Land (BLND.L: Quote, Profile, Research) and Segro (SGRO.L: Quote, Profile, Research) want more flexibility in how they meet obligations to distribute 90 percent of their profits to shareholders, so they can use existing property investment income to bankroll new buys in the coming months.

The British Property Federation, the trade body that represents the interests of the Real Estate Investment Trust sector, has written to HM Treasury to outline the case for payment in stocks in lieu of cash, while the industry recovers from the sharpest slump seen for generations.

It hopes Chancellor Alistair Darling will approve the reforms in the Pre-Budget Report, due next month.

"The inability of REITs to count stock dividends towards the 90 percent requirement creates an unnecessary instability for REITs, constraining their ability to conserve cash by offering a stock alternative at a time when many listed companies in the UK and overseas, are doing precisely that," Peter Cosmetatos, BPF Director of Policy said.

"This has become a critical problem because at a time of credit rationing by banks, distributing cash goes against the principles of good stewardship," he added.

Under current rules, UK real estate investment trusts are exempt from corporation tax and capital gains tax on their property sales, as long as they distribute a minimum 90 percent of their profits to shareholders in cash dividends.

This rule has prevented companies from building up capital reserves to insulate them from credit market chills or fuel investment sprees that could boost earnings, executives say.