Solicitors' Accounts - Agent vs Stakeholder, Petty Cash and Interest Flashcards

1
Q

Deposit held as agent

A
  • On receipt - paid into client account
  • On exchange - credited to seller’s account
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2
Q

Deposit held as stakeholder

A
  • Held by seller’s solicitor for both buyer and seller until completion
  • Rules require all receipts of client money be recorded on the client ledger for that client and so this deposit is treated as if it belongs to a separate client (client ledger in joint name of buyer and seller - called ‘stakeholder ledger’)
  • On receipt - held in stakeholder’s account (credit stakeholder ledger, client account with deposit and deposit cash sheet, client account)
  • On completion - held in seller’s account (inter-client transfer, debit joint stakeholder account, client account and credit seller client account, client account)
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3
Q

Mortgage Advances

A
  • Received from the lender held for the lender until completion
  • No specific guidance on this situation in rules but the buyer and lender are separate clients, therefore separate client ledger for lender needs to be created
  • On receipt = held in lender’s account

Credit lender ledger, client account with mortgage advance and debit cash sheet, client account

  • On completion = held in buyer’s account (via inter-client transfer)
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4
Q

Petty Cash

A
  • Not a bank account but real cash
  • Always business money - if used to pay something for a client the entry is recorded on client ledger, business account
  • Debit client ledger, business account and credit petty cash ledger, business account
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5
Q

Accounting for Interest

A
  • Firm must account to clients or third parties for a fair sum of interest on any client money held, unless agreed otherwise
  • Firm must set its own policy as to when it is fair to account to clients for interest and how it will calculate interest
  • Must provide policy to client or draw the client’s attention to it at start of retainer
  • Policy must be regularly reviewed
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6
Q

Dealing with Interest

A
  • Open separate deposit account for a client’s money or use the general bank account
  • Firm may choose to open separate client account if it is likely the firm will be holding a substantial amount for that client for a significant period of time
  • Not common for separate accounts to be opened for every client
  • Firm does not have to account to client for all of the interest (only a fair sum), usual to account to client for all the interest earnt
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7
Q

Payment of Interest

A
  • Offset it against any money owed to the firm
  • Transfer the interest from the business account to the client account
  • Send the interest payment directly to the client (if the transaction has ended)
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