My Solicitor has my house deposit? - Where's my Interest?
As the conveyancing purchase process races (hopefully) towards an exchange of contracts, the solicitor asks the purchaser for the deposit money. This money is then a catalyst for exchange, when contracts become legally binding and enforceable.
This deposit sum may be up to 10% of the purchase price, and for most of us, it is a substantial amount of money. Most people take the money from a savings account, but I wonder how many of us consider their savings account interest rate, compared with the interest terms your solicitor will offer you.
Many clients are not aware that there are very specific rules governing the question of interest payments. Solicitors are now governed by an Independent Body, the Solicitors Regulation Authority, and new Conduct Rules came into force on 1st July 2007. Members of the public can see them at www.sra.org.uk.
So, what about my interest? Part C in the Conduct Rules sets out the position. Depending upon the amount of money paid in, the funds are either placed in a “separate designated client account” (which often attracts a higher rate of interest), or in a “general client account”.
If the funds are placed in a separate designated client account, the solicitor must pay the client for all interest earned on the account.
If the funds are placed in a general client account, the solicitor must pay the client a sum in lieu of interest. However there are a number of exceptions where a solicitor does not have to pay. Typically, if the amount calculated is £20 or less, or if the period of time the money is held is not sufficient for the purposes of the Conduct Rules. Say, for example, you give your solicitor £10,000 less than two weeks before exchange, then no interest is payable. The basic rule of thumb is that the higher the amount deposited with your solicitors, the shorter the period of time that needs to elapse before you can ask for interest. The quickest time that a sum in lieu of interest can accrue is eight days, when the sum involved is £20,000 or more.
What about the interest rate? Well the Conduct Rules say solicitors must aim to obtain a reasonable rate of interest on money held in a separate designated client account, and must account for a fair sum in lieu of interest on money held in a general client account. The Rules also state that the sum in lieu of interest need not necessarily reflect the highest rate of interest obtainable, but it is not acceptable to look only at the lowest rate of interest.
In conclusion, if you are likely to be lodging more than £20,000 with your solicitor for more than one week, it is sensible to discuss the interest rates, and the likely payment. This way, you can make an informed decision as to whether your savings account can earn more for you. A final thought- don’t forget to factor in any bank fees to transfer monies, it can quickly offset any interest you could earn.
Monday, 30 July 2007
