Solicitor's bank accounts
Discussion
Now I'm having some dealings with my solicitor again it reminded me of something I've wondered about before.
Do solicitors have some sort of special high interest, low time span account for client's money to pass into and out of.
Even a small practice that does conveyancing must have hundreds of thousands flowing through, I imagine someone has wanted to make a little for the time it is sitting there!
Do solicitors have some sort of special high interest, low time span account for client's money to pass into and out of.
Even a small practice that does conveyancing must have hundreds of thousands flowing through, I imagine someone has wanted to make a little for the time it is sitting there!
DKL said:
Now I'm having some dealings with my solicitor again it reminded me of something I've wondered about before.
Do solicitors have some sort of special high interest, low time span account for client's money to pass into and out of.
Even a small practice that does conveyancing must have hundreds of thousands flowing through, I imagine someone has wanted to make a little for the time it is sitting there!
As far as I know, client accounts cannot be interest-bearing.Do solicitors have some sort of special high interest, low time span account for client's money to pass into and out of.
Even a small practice that does conveyancing must have hundreds of thousands flowing through, I imagine someone has wanted to make a little for the time it is sitting there!
Zoon said:
DKL said:
Now I'm having some dealings with my solicitor again it reminded me of something I've wondered about before.
Do solicitors have some sort of special high interest, low time span account for client's money to pass into and out of.
Even a small practice that does conveyancing must have hundreds of thousands flowing through, I imagine someone has wanted to make a little for the time it is sitting there!
As far as I know, client accounts cannot be interest-bearing.Do solicitors have some sort of special high interest, low time span account for client's money to pass into and out of.
Even a small practice that does conveyancing must have hundreds of thousands flowing through, I imagine someone has wanted to make a little for the time it is sitting there!
Solicitors are subject to an annual ‘audit’ under the Solicitors Accounts Rules whereby the auditors check that the solicitors have complied with the rules.
Its been about 20 years since I last had to do this so might be wrong, but, yes, there is interest accruing on it and iirc the solicitor has to pay over the interest to the client if asked. However, as mentioned, its a bit of a burden.
I also think there may have been a de minimus limit whereby it is not required to be distributed.
Could be wrong, but I never received the interest each time I had conveyancing, and one time was a broken chain.
Its been about 20 years since I last had to do this so might be wrong, but, yes, there is interest accruing on it and iirc the solicitor has to pay over the interest to the client if asked. However, as mentioned, its a bit of a burden.
I also think there may have been a de minimus limit whereby it is not required to be distributed.
Could be wrong, but I never received the interest each time I had conveyancing, and one time was a broken chain.
Fat hippo said:
Solicitors are subject to an annual ‘audit’ under the Solicitors Accounts Rules whereby the auditors check that the solicitors have complied with the rules.
Its been about 20 years since I last had to do this so might be wrong, but, yes, there is interest accruing on it and iirc the solicitor has to pay over the interest to the client if asked. However, as mentioned, its a bit of a burden.
I also think there may have been a de minimus limit whereby it is not required to be distributed.
Could be wrong, but I never received the interest each time I had conveyancing, and one time was a broken chain.
The de-minimus limit is normally set out in the terms of engagement. Client can agree them or not.Its been about 20 years since I last had to do this so might be wrong, but, yes, there is interest accruing on it and iirc the solicitor has to pay over the interest to the client if asked. However, as mentioned, its a bit of a burden.
I also think there may have been a de minimus limit whereby it is not required to be distributed.
Could be wrong, but I never received the interest each time I had conveyancing, and one time was a broken chain.
CubanPete said:
Long time ago, but think it was a friend of my parents daughter was a solicitor, they held the money in an account that was held in escrow, but offset against her mortgage.
Sounds very dodgy to me. Did she pay the saving in interest to the clients? It is, after all, not her money in the first place.PurpleFox said:
Related question - is a 'client account' protected in any way. IE, if they go bust before they pay out the money that they are holding....
Yes, because the money in the client account does not belong to the business then it cannot be seized if/when the business goes pop. I had a client account as part of my business accounts with HSBC Business. When HSBC froze my business accounts* they didn't freeze the Client Deposit Account; I presume because they weren't allowed to. This does beg the question as to why a business can't do all it's business banking through a Client Deposit Account, but I've never sought an answer to that question.
-*- HSBC Business Banking being the most incompetent, inept, unhelpful shower of sh*t I have ever had the misfortune of coming across. If you are looking for someone to give you a business bank account then literally ANYONE else will be better than these cretins, but that's a story for another day.
2Btoo said:
This does beg the question as to why a business can't do all it's business banking through a Client Deposit Account, but I've never sought an answer to that question.
A client account is there to separate (and protect) client money from company money (which is held in an office account). There are very specific rules for how the client account should be used and how money is transferred. In many cases, client accounts have to be audited each year and some breaches of the regulations could lead to being reported to the Solicitors Regulation Authority.2Btoo said:
Yes, because the money in the client account does not belong to the business then it cannot be seized if/when the business goes pop.
I had a client account as part of my business accounts with HSBC Business. When HSBC froze my business accounts* they didn't freeze the Client Deposit Account; I presume because they weren't allowed to. This does beg the question as to why a business can't do all it's business banking through a Client Deposit Account, but I've never sought an answer to that question.
-*- HSBC Business Banking being the most incompetent, inept, unhelpful shower of sh*t I have ever had the misfortune of coming across. If you are looking for someone to give you a business bank account then literally ANYONE else will be better than these cretins, but that's a story for another day.
I had a client account as part of my business accounts with HSBC Business. When HSBC froze my business accounts* they didn't freeze the Client Deposit Account; I presume because they weren't allowed to. This does beg the question as to why a business can't do all it's business banking through a Client Deposit Account, but I've never sought an answer to that question.
-*- HSBC Business Banking being the most incompetent, inept, unhelpful shower of sh*t I have ever had the misfortune of coming across. If you are looking for someone to give you a business bank account then literally ANYONE else will be better than these cretins, but that's a story for another day.
Thanks for that, had hoped that would be the case.
There are essentially two types of client account - the first is when a company opens a separate bank account for handling and ringfencing client money but doesn't have a bank designated client account. Basically that's when a firm has no legal obligation to have a client account, but decides to operate one anyway, e/g a furniture company taking deposits which it decides to ringfence rather than put in it's general bank account
The second type is when the bank recognizes the account as a client account
The difference between the first and the second is there are 'no rights of set off' with a bank designated client account, which is the important bit for protection, so if the company enters into insolvency or for some other reason has it's accounts frozen, the client money is safe. Solicitors, lawyers, estate agents and others tend to be subject to regulations that demand they have a proper client acccount. The key to the letter another poster mentions keeping on file, is the expression no rights of set off
It's harder and harder to open a proper client account - you have to be in a specific group of professions
As for interest, banks are still paying pitiful amounts. There is someone who benefits from the interest - the banks ! In the vast majority of instances, the admin cost of passing on the interest is more than the interest earned, hence the de minimis
Barclays are still only paying 0.25% interest so £2.5k p.a. on £1M.
The second type is when the bank recognizes the account as a client account
The difference between the first and the second is there are 'no rights of set off' with a bank designated client account, which is the important bit for protection, so if the company enters into insolvency or for some other reason has it's accounts frozen, the client money is safe. Solicitors, lawyers, estate agents and others tend to be subject to regulations that demand they have a proper client acccount. The key to the letter another poster mentions keeping on file, is the expression no rights of set off
It's harder and harder to open a proper client account - you have to be in a specific group of professions
As for interest, banks are still paying pitiful amounts. There is someone who benefits from the interest - the banks ! In the vast majority of instances, the admin cost of passing on the interest is more than the interest earned, hence the de minimis
Barclays are still only paying 0.25% interest so £2.5k p.a. on £1M.
I had a fantastic numbers team in my practice. All interest earned on the general client account had to be allocated to clients, and each year I had to sign a return as Principal to the SRA confirming it balanced to the penny.....straight yes/no answer required. If no, full explanation was required.
Then that client account was independently audited by Moore Stephens at a cost to my firm of about 3k.
Then that client account was independently audited by Moore Stephens at a cost to my firm of about 3k.
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