Protecting your home buying money whilst with solicitor

YippyDawg

I'm currently buying a house for the first time, completing soon, and was surprised to find out that all the money, deposit and mortgage, is lodged with solicitor before hand (for the avoidance of doubt I am in Scotland).

However I'm even more surprised to find out the dire state of protection for that money whilst out of my hands. It seems in Scotland the only guarantee against your solicitor fraudulently taking that money or going bust is a blanket guarantee scheme that following website, petercherbi.wordpress.com/advisory-on-client-funds, claims is underfunded and takes years to pay out. I can't comment on whether that report is accurate but it certainly gives me pause for thought!

Given the current state of the market and those reliant on property related income I'm somewhat warier than normal. I'm wondering if anyone here has any more insight into this issue, knows if the reports on the guarantee scheme are accurate, and any suggestions on how to protect a large amount of money during this process?

Are there any insurance products that an individual could use to protect themselves for instance?

Fire_Fox

What do you think is going to happen, the solicitor is going to retire to the Costa del Crime with your £100K? Even if they managed a clean getaway with a few houses worth of cash it's unlikely to be compensation enough for never being able to practice law again, never able to return to the UK and the risk of a nice long spell at her Majesty's pleasure. I might be wrong, but if they go bankrupt I would have thought you money would have been safe from the receivers as it is held in a separate client account. I would have thought you'd be more likely to win the Lottery than your solicitor to fleece you between exchange and completion.

seabright

I can't speak for Scotland, but in England we all have to be insured and if we ran off with your money our Indemnity Insurers would refund you. I can't believe the situation is any different in Scotland.

YippyDawg

Obviously I'm using a reputable practise and I'm certainly don't believe the risks of being so unlucky are high. However recent history shows the unthinkable can happen, cast your mind back 3 years ago and ask yourself who would have thought savers would be getting bailed out by the FSCS and the government!

Given the large sums involved I don't think it is an unreasonable question, is your money 100% safe whilst it is out with your control, and if not is there anything you can do to protect yourself. Indeed the banking section of this website goes to considerable detail on how to do so with your savings.

Firefox: It's not just your deposit they have control over, the money you are borrowing too of course. And it isn't just the partners who could make off with your money but employees too. I think you are probably right about bankruptcy assuming your funds are correctly lodged in the first place.

seabright: Thanks for the reply, that is interesting to hear. From what I gather from that site I mentioned it appears there is a blanket scheme in operation up here but reading the info on the professional bodies website it indicates payouts from that scheme are "discretionary" and subject to a lot of conditions!

Full details; scottishlegalcomplaints.org.uk/media/7495/final%20report%20to%20slcc.pdf

I'm not entirely sure what to make of it but it didn't fill me full of confidence.

Fire_Fox

YippyDawg wrote: »

Firefox: It's not just your deposit they have control over, the money you are borrowing too of course. And it isn't just the partners who could make off with your money but employees too. I think you are probably right about bankruptcy assuming your funds are correctly lodged in the first place.

There will be systems in place to protect against this: they aren't going to let the cleaners or secretaries have full access to the client accounts! And if the unthinkable happened it would be down to the partners to rectify the situation, or get struck off. Honestly I think you are talking about a billion to one risk, it's not even as if your money is in their client account for very long. As an FTB there are far better uses of your time than researching this!

googler

OK, let's assume for the sake of rhetoric that the solicitor DIDN'T hold all the money immediately prior to completion/entry date.

You''ve got your deposit, mortgage monies, etc and you have to transfer £100, £150k, perhaps more, to the sellers or their solicitor. How would you do this? Take it all out in cash and turn up at the seller's solicitors office with a bundle of £100s?

Which do you think the seller will be more comfortable with? You or another solicitor?

YippyDawg

> As an FTB there are far better uses of your time than researching this!

Maybe but this is much more fun

Anyway I'm not the sort of person who just blindly does what they are told, I like to know the facts, especially where there is a contract involved.

BTW I wouldn't recommend doing a search on this topic on Google, boy you turn up some scary stuff.

YippyDawg

Googler that is a moot point as the lender makes you deal through a solicitor anyway so you don't get a choice.

It just somehow seems there should be a more explicit guarantee, or maybe I'm missing something? Like in the investment world where the FSA regulates the companies and the FSCS then provides you with a guarantee on how much is covered and how it would be returned to you.

seabright

YippyDawg - phone the Law Society of Scotland, I am sure they will be able to put your mind at rest.

chappers

YippyDawg wrote: »

Googler that is a moot point as the lender makes you deal through a solicitor anyway so you don't get a choice.

That is because your solicitor MUST adhere to certain criteria with regards to how they operate, handle your money, are insured etc or face being barred from practising.

The law regarding conveyancing is set up to ensure that going through the solicitor is the most honest and safe way to carry out the transaction.

googler

http://www.lawscot.org.uk/Members_Information/financial_compliance/

...or phone the Law Society and talk to someone in their Compliance dept.