Interest on Conveyancing Matter

[Elvina Fooy]

Do people add interest to conveyancing files where monies are held between sale and purchase rather than the funds being returned.

Our auditors have noted it as a breach that we have not paid interest on one, but no comment on the fact we held the funds for 43 days ?

whats peoples thoughts ?

Cheers

Elvina

[Claire Mills]

Depending on the interest policy; we would always add interest to any funds held for clients.

[Tiffany Woodhall]

In your case:

43 days and a likely high balance = yes, interest should be calculated and credited (unless your interest policy states otherwise and the client has been informed).

This is likely why your auditor flagged the lack of interest but not the retention — they focused on Rule 7.1 rather than Rule 3.3.

Auditors often take a risk-based approach:

If the funds were clearly linked to an ongoing transaction (so Rule 3.3 not clearly breached),

But no interest was applied, that’s a technical breach of Rule 7.1 and easier to evidence on the ledger.

So — they may have noted the holding period as acceptable given the circumstances, but interest omission as a non-compliance.

[Sarah Fitzmaurice]

We don’t (add interest) but then we don’t hold monies for long enough, if at all to accrue any interest. Unless the transaction has exchanged with a completion date within the next 7 days we would always return funds.

The problem is that returning the funds to the client for them to have to turn round and send them back a few weeks later causes extra hassle for the client which is I guess why you are keeping them but “client convenience” is not a reason to hold the funds and could be seen as “acting as a bank” I believe?

The auditors will pick a sample to test different areas it may be that this matter flagged for interest but they weren’t testing it for funds helds. Were the sale proceeds being held on the sale ledger or the ongoing purchase?
Hope this helps?
Sarah

[Liz Simon]

Assuming the linked purchase is clearly proceeding then I wouldn’t have expected auditors to flag the fact that you’ve been holding funds for 43 days, as it seems to be that there’s a proper reason to hold those funds. But unless you’ve agreed a specific arrangement with the client, then those funds should certainly generate interest (subject to your de minimis etc etc). Was there a particular reason why interest wasn’t paid on this one?

[Geoff Smith]

I think the answer is that you should always endeavour to comply with the rules at all times.

Two wrongs do not make a right.

It is likely the case that there are other breaches within the accounts which the auditors have not picked up given that they are sampling randomly.

Take the positive from only the one being noted but tighten up on procedures to aim for a clean sheet next time round.

• This reply was modified 2 weeks, 1 day ago by Geoff Smith. Reason: Grammatical error 🙈

[Marc Pegg]

For the purpose of this response, I’ll assume it is an audit undertaken by accountants that your firm has engaged with.

We’ve always found our auditors to be helpful when potential breaches are spotted. Ask for feedback and clarity – how else can the firm learn from this. We also provide a management response to our accountants for all observations, big or small and then file this with the audit report to evidence our reflection and change of systems and controls if required.

Kind regards
Marc

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