What happens if solicitor goes bust?

mrstinchcombe

I might just be paranoid but I'm in the process of buying a house and its almost got to the stage where I part with my deposit to my solicitor.

We all know what the economic climate is like but where do I stand if my solicitor goes into administration or bust during the period where they are holding my money?

Is it bye bye deposit?

Swipe

Yes, if they go bust you lose the lot. I'm in the same position but I'm hoping to exchange and complete within a couple of days. You'd have to be the unluckiest person in the world for that to happen though. I'm not too worried as I asked my solicitor if I had to wait for the bankers draft to clear before I could complete and they said they would accept the draft as cleared funds on the day I give it to them, meaning they must have plenty of funds in their account to cover the purchase amount.

LeonandAlison

Well solicitors can not be a limited company, i believe they can be a limited liability partnership but that means when the firm goes bust the solicitors are still personally accountable (if its a LLP then the risk is shared). This is one benefit of going with solicitors over Conveyancing firms.

However the larger creditors will get paid first, so bear that in mind. As Swipe says you will lose the lot, as other people will always get paid first and its usually the bank.

mrstinchcombe

I know it would be bad luck but like most if I lost the deposit I wouldn't be able to buy for a hell of a long time!

gratefulforhelp_2

My DH is a solicitor and tells me that the money should be held in a client account. These deposits are guaranteed by the law society in case the solicitor does go bust. It's not all bad news, but although it would take time to get the money back, you wouldn't lose it.

Robert_Sterling_3

The money never belongs to the Solicitor so no worries.

mybrainhurts

Just adding my vote for the "don't worry" party. It is meant to be in a client account. The Law Society is proactive in ensuring it is in fact in a client account. If it isn't in a client account you will be compensated in full by a levy on all solicitors.

domcastro

No - don't worry - it's not bye bye money. The money is in a Clients account and is protected.

mrstinchcombe

Spot on, cheers for the replies.

Nowadays I don't buy expensive items I can't take away on the day without using a credit card so thats all reassuring!

SouthCoast

We will not normally make a grant resulting in you receiving more than £1 million, including interest, costs and other payments.

http://www.sra.org.uk/consumers/problems/solicitor-owes-money/claiming-compensation.page

little_sarah_2

My OH is part of the management of a solicitors firm and has said:-

Firstly solicitors CAN be limited companies (his firm is!).
However as many posters have rightly said your deposit should be held in a Client Account on your behalf. If it is not then the solicitor breaches the Solicitors Account Rules and indeed the SRA will get involved.

If your money is correctly held by the solicitor in a client account then the money is protected as if you had banked it at the institution that the solicitors bank with. If the solicitors go bust then the SRA will appoint another firm to deal with it. If however the Bank goes bust (pretty unlikely but still...) your money would be dealt with under the Financial Services Compensation Scheme (FSCS). Please be aware that the FSCS only covers the first £50,000 of your money banked with a particular institution. If therefore you have £40,000 of savings with the Bank of Dodgyness (or one of its subsidiaries) and your solicitor holds £15,000 in their client account which is also in the Bank of Dodgyness the total (£55,000) exceeds the limit and you will not recover all of your money!