Solicitors Client Account funds - safe or not?

drum_3

Maybe my last post was a bit unfair as I have to confess I would never have thought about it if we were living in normal times. Kind of unthinkable maybe even to the law firms.

dragonsoup wrote: »

If you are concerned why don't you just ring the FSCS helpline and pose the question. They are very helpful.

I did yesterday on behalf of a client in much the same position.

Thanks dragonsoup.

I'm not terribly worried for myself but I do think it perhaps needs clarifying for the general public anyway. In principle it could affect people completely out of the blue.

I might try the helpline but from the articles it seems fairly clear that the situation is ahem 'unclear'

Did your client have funds in a similar position? Did you get an answer that was favourable?

Stuball_2

My mother nearly had a heart attack a couple of years ago due to funds in a client account. She had remortgaged her house and the solicitor received the funds and sent her a cheque which she deposited. That saturday the cheque came back in the post as the client account had been frozen. She called down the office but there was a sign in the window saying they had ceased trading. After spending the weekend worrying/crying she received a phone call on the monday from another solicitor to say that due to financial irregularties the solicitor had been struck off and the firm closed and he was now dealing with the clients. She received a non rubber cheque in the post that week but I always wondered what would have happened if he had emptied the client account first!

tyllwyd

drum wrote: »

Hi tyllwyd

Had chance to read the article in Post 8 yet?

That seems to explain my earlier quoted line, but heck this is preposterous if both the banking profession and the legal profession are not sure of their position.

I know these are strange times but surely someone running some of these massive law firms must had the thought cross their mind at some point before all this arose?

If me 'joe public' can have it flit across my limited intellect then I'm staggered that contingency plans have never seemingly been previously considered for this eventuality.

Yes, the second article does seem to explain the £35/50K per client aspect - although it doesn't seem so confident that it would stick! But surely even for a high street solicitor, if they had a couple of probate jobs and a few house purchases going through, their client account would smash through that limit in no time.

Obviously, I've got no idea what the top guys might have been thinking recently, but I've worked on books aimed at solicitors and all the advice has been about keeping the clients money separate from firm money, keeping records etc etc etc - not even a mention of how to choose a suitable bank or what might happen if a bank went under. I'd say it was perfectly possible that there aren't any plans, because nobody thought it would happen (or not to as many banks all at the same time). They probably thought that if it did ever happen, it would just be one bank, and there would some solution to save it (like Northern Rock etc). Its probably only in the last few months or so that they would have woken up to the fact that it could be a real problem but it takes months/years to get new legislation /guidance drafted and in force.

"this is preposterous if both the banking profession and the legal profession are not sure of their position" - it seems amazing, but it isn't as unusual as you would think! Every time there is new legislation, it is good for me as a legal editor, because there will be new books coming out to try to explain the new situation to solicitors, and it is very common that the effect of the new rules aren't clear, or contradict something else, and sometimes nobody can be sure what the situation is until it has been tested in court.

xxxx_4

Hi All

In a similar position but have the solicitor applying for probate and we have opened the account. Same problem as we do not have probate as yet but over 200k is sat in one building society. Spoke to the solicitor and asked if we could open accounts with different banks/building society's
and was told that this may cause a problem when finalising the probate. We must just wait for the probate to be granted and then get the money in a.s.a.p. unless the government quarantee 100%.

This is a very difficult position to be in and if it all goes wrong we would lose over 100k under the current rules.

Any advise would be very much appreciated.

xxxx

lotto-dreamer

This is the latest from the Law Society

http://www.lawsociety.org.uk/newsandevents/news/view=newsarticle.law?NEWSID=414861

It is currently a hot topic in legal firms.

Bossyboots

The Law Society has issued a practice note to solicitors on this issue which has been updated today and can be found here http://www.lawsociety.org.uk/productsandservices/practicenotes/bankingcrisis/1310.article

tyllwyd

But if you read those notes, it's all about advice to solicitors on what they should do to protect their own situation if the bank fails so that they won't be held negligent (which is fair enough considering it is advice from the Law Society to solicitors). But it isn't any help if you are one of the poor sods whose money gets lost in the meantime!

silvercar

To be fair I would expect that virtually all solicitors' client accounts are held with major UK banks rather than obscure banks from say Iceland.

tyllwyd

silvercar wrote: »

To be fair I would expect that virtually all solicitors' client accounts are held with major UK banks rather than obscure banks from say Iceland.

I did come across a tiny item in a book today (I'd never have noticed it if it hadn't been for this discussion) saying that solicitors had to keep a record of why they considered that the bank they'd chosen for their clients money was suitable (or something along those lines, I don't have it to hand now so I can't double check). So I'd imagine that they would have complied with that by choosing a major UK bank and I'd imagine that up until recently everyone thought that was as close to 100% safe as you could get!