Question about Client Accounts

[Julian]

I see a number of banks offering client accounts for legal professionals, property managers, etc. When an organisation opens such a client account in which to hold one of its client's cash (e.g. a property manager managing the service charges for a block of flats) is the account simply an administrative convenience offered by the bank for the property manager (or lawyer or whomever) so that it can be managed and reported on separately from other client accounts or does opening such an account and nominating it as being for Client-X confer some legal protection such that funds within that account legally remain the property of Client-X rather than the property manager?

I am on the board of the company owning the freehold for our block of flats and someone is querying the security of the funds in our client account with our managing agents (an arrangement we have had no issues with for 28 years now). Unfortunately the financial contact at the managing agent is away for the next 2 weeks and I would like to have some idea what the general options are in the UK banking/legal system before asking the question specifically of the managing agents when the finance person returns.

- Julian

[Charlottesquare]

I see a number of banks offering client accounts for legal professionals, property managers, etc. When an organisation opens such a client account in which to hold one of its client's cash (e.g. a property manager managing the service charges for a block of flats) is the account simply an administrative convenience offered by the bank for the property manager (or lawyer or whomever) so that it can be managed and reported on separately from other client accounts or does opening such an account and nominating it as being for Client-X confer some legal protection such that funds within that account legally remain the property of Client-X rather than the property manager?

I am on the board of the company owning the freehold for our block of flats and someone is querying the security of the funds in our client account with our managing agents (an arrangement we have had no issues with for 28 years now). Unfortunately the financial contact at the managing agent is away for the next 2 weeks and I would like to have some idea what the general options are in the UK banking/legal system before asking the question specifically of the managing agents when the finance person returns.

- Julian

Some professionals require to carry client monies within client accounts per the rules their regulators set, solicitors, most regulated accountants, IFAs etc. You still have no direct protection re the client accounts they manage but some professions ( e.g.legal) have protection funds (law society) that will make good if your friendly solicitor does a runner with all the dosh. The banks themselves are not protecting the monies, how could they, they cannot know which payments out are authorised and which are not, so imho the key re the professional is enquiring what, if any, protection their professional body gives re said funds.

https://www.rics.org/globalassets/rics- ... scheme.pdf

https://www.lawscot.org.uk/for-the-publ ... tion-fund/

[Slarti]

Thinking back to my auditing days (long, long ago) the client account held the monies for many clients of the solicitor. There was not one account per client, that was all recorded by in house book keeping.

I suspect that things are still the same, but easier to keep track of with computers than it was on cards.

Slarti

[Charlottesquare]

Thinking back to my auditing days (long, long ago) the client account held the monies for many clients of the solicitor. There was not one account per client, that was all recorded by in house book keeping.

I suspect that things are still the same, but easier to keep track of with computers than it was on cards.

Slarti

I think if the sum is over X and held for more than Y days an individual account is/was needed, or certainly in Scotland. The Usher and Pilgrim software that was then available in the 1980s/1990s reported the client balance in multi column format to accommodate the say building society deposits or other client specific holdings.

Back in the 1970s when I was a child my father( a solicitor) regularly went to events where the building societies touted for solicitor business re these deposits, as children we always got given in January a vast collection of pocket diaries that had been offered as "bribes".

When I did do law society audits in the early 1990s we would be sample checking such deposits, in named client accounts, to vast bundles of passbooks.

My father's firm was one of the earlier Scottish Law firms to invest in the card accounting systems, but they had a pretty large Trust department and managed quite a lot of client money;, back in the 1960s they had about five partners, a further five qualifieds, a couple of trainees, about six secretaries and a cash room team of four and a mailroom clerk- somewhat labour intensive.

[Slarti]

Thinking back to my auditing days (long, long ago) the client account held the monies for many clients of the solicitor. There was not one account per client, that was all recorded by in house book keeping.

I suspect that things are still the same, but easier to keep track of with computers than it was on cards.

Slarti

I think if the sum is over X and held for more than Y days an individual account is/was needed, or certainly in Scotland. The Usher and Pilgrim software that was then available in the 1980s/1990s reported the client balance in multi column format to accommodate the say building society deposits or other client specific holdings.

Back in the 1970s when I was a child my father( a solicitor) regularly went to events where the building societies touted for solicitor business re these deposits, as children we always got given in January a vast collection of pocket diaries that had been offered as "bribes".

When I did do law society audits in the early 1990s we would be sample checking such deposits, in named client accounts, to vast bundles of passbooks.

My father's firm was one of the earlier Scottish Law firms to invest in the card accounting systems, but they had a pretty large Trust department and managed quite a lot of client money;, back in the 1960s they had about five partners, a further five qualifieds, a couple of trainees, about six secretaries and a cash room team of four and a mailroom clerk- somewhat labour intensive.

I don't remember different accounts, and certainly no building society passbooks, just normal deposit account bank statements.
This was a large firm of solicitors in London's West End and I was part of the client account audit team of 4 (I think) there being another team of 4 or 5 doing the practice accounts. I did that audit twice for about a week each time, back in the mid 70s.
Best thing about it was being introduced to The Guninea, Bruton Place for lunch by the team leader.

Slarti

[brightncheerful]

When i collected rents on behalf of landlords I had a clients account in which I'd deposit all monies received before deducting my fees and forwarding the balance to each client. The amount of money belonging to each client was recorded separately .I continue to manage properties and collect rents but nowadays arrangements are in place for rents either to be paid by the tenant direct to the landlord's bank account or if by cheque then either I pay the cheque into the landlord's bank account or send it to the bank by post. Where clients put me in funds so that I can then use the money for a client project, the duration in my personal account is so short as to not be worthwhile having a separate client account.

The commercial property market is unregulated so I do not think there is any legal requirement for a property adviser/manager to have a separate bank account for client money - ie, clients account - except in so far as compliance with the requirements of any professional organisation/body of which the adviser is a member: the organisation itself might have a clients’ money protection scheme. I think the only reason to have a clients account is to display trust - reinforce the adviser's integrity - by safeguarding client money from the adviser's personal monies.

In the event of adviser default for whatever reason, I wouldn't have thought a bank would protect client's account monies from the adviser's circumstances unless an authorised signatory for the account were the client. Even then, withdrawals would need to be subject to the client's (overriding) signatory.

The only time i encountered 'raised eyebrows' at my not having a separate clients account was when I was acting as executor. I had informed all parties of my intention to deposit some money in my personal account pending distribution. The estate's solicitors suggested that if anything were to happen to me and my bank account frozen there would be difficulties/delays in accessing the estate's funds. Interestingly, none of the beneficiaries, of which one was a national charity, queried the arrangement.

[Charlottesquare]

Thinking back to my auditing days (long, long ago) the client account held the monies for many clients of the solicitor. There was not one account per client, that was all recorded by in house book keeping.

I suspect that things are still the same, but easier to keep track of with computers than it was on cards.

Slarti

I think if the sum is over X and held for more than Y days an individual account is/was needed, or certainly in Scotland. The Usher and Pilgrim software that was then available in the 1980s/1990s reported the client balance in multi column format to accommodate the say building society deposits or other client specific holdings.

Back in the 1970s when I was a child my father( a solicitor) regularly went to events where the building societies touted for solicitor business re these deposits, as children we always got given in January a vast collection of pocket diaries that had been offered as "bribes".

When I did do law society audits in the early 1990s we would be sample checking such deposits, in named client accounts, to vast bundles of passbooks.

My father's firm was one of the earlier Scottish Law firms to invest in the card accounting systems, but they had a pretty large Trust department and managed quite a lot of client money;, back in the 1960s they had about five partners, a further five qualifieds, a couple of trainees, about six secretaries and a cash room team of four and a mailroom clerk- somewhat labour intensive.

I don't remember different accounts, and certainly no building society passbooks, just normal deposit account bank statements.
This was a large firm of solicitors in London's West End and I was part of the client account audit team of 4 (I think) there being another team of 4 or 5 doing the practice accounts. I did that audit twice for about a week each time, back in the mid 70s.
Best thing about it was being introduced to The Guninea, Bruton Place for lunch by the team leader.

Slarti

Maybe the Law Society of Scotland was ahead of the game, if this were not done how does the owner of the funds get any interest on his money?

When we sold our last house in 1997 , on 30th September, the funds stayed with our solicitor until the new house was purchased on 25th November, this money was placed on distinct deposit account in our name by solicitor, we were credited with the interest. Similarly when I was a trustee of about six trusts each had their own deposit account, surplus funds were moved from general client account to the client individual deposit account to ensure the client (trust) benefited from the interest.

You had better joy than myself re meal perks, I was apprenticed with Hodgson Impey in Glasgow (RSM now I think) ,you should have tried the eating establishments near Paisley Road West in the 1980s (Paisley Station is interesting!!!!) or Broadmeadows Industrial Estate, Dumbarton- Scottish cuisine at its finest.

That, or changing trains at Castlemilk Station in 1986 and wondering, as you stood there dressed in pinstripe suit with briefcase ,if your connection would arrive before one of the locals spotted the "easy meat" standing out like a sore thumb. And that does not even start on the audits in some parts of Glasgow which you were forbidden to leave on foot after say 5.00 p.m.

[Slarti]

if this were not done how does the owner of the funds get any interest on his money?

The bank supplied statements against each deposit and provided statements of interest for them, but they were all under one bank account, which seemed pretty clever, at the time.

You had better joy than myself re meal perks, I was apprenticed with Hodgson Impey in Glasgow (RSM now I think) ,you should have tried the eating establishments near Paisley Road West in the 1980s (Paisley Station is interesting!!!!) or Broadmeadows Industrial Estate, Dumbarton- Scottish cuisine at its finest.

That, or changing trains at Castlemilk Station in 1986 and wondering, as you stood there dressed in pinstripe suit with briefcase ,if your connection would arrive before one of the locals spotted the "easy meat" standing out like a sore thumb. And that does not even start on the audits in some parts of Glasgow which you were forbidden to leave on foot after say 5.00 p.m.

Not all places were as good as that. EG The East End slaughter house where the rats were as big as the cats, or the dairy farm at the end of a track where you really weren't that keen on putting your wellies back in the car. Or one place that I spent a couple of weeks at that was so cold that when I got out of the car I put layers of clothes on, including coat, hat and gloves and only took them off after sitting in the car with the engine running for about half an hour. All 3 of those were packed lunch places, though I preferred to skip lunch and go home an hour earlier at those ones.

Luckily, violence against me was never a risk, as far as I was aware.

Slarti

[Charlottesquare]

if this were not done how does the owner of the funds get any interest on his money?

The bank supplied statements against each deposit and provided statements of interest for them, but they were all under one bank account, which seemed pretty clever, at the time.

You had better joy than myself re meal perks, I was apprenticed with Hodgson Impey in Glasgow (RSM now I think) ,you should have tried the eating establishments near Paisley Road West in the 1980s (Paisley Station is interesting!!!!) or Broadmeadows Industrial Estate, Dumbarton- Scottish cuisine at its finest.

That, or changing trains at Castlemilk Station in 1986 and wondering, as you stood there dressed in pinstripe suit with briefcase ,if your connection would arrive before one of the locals spotted the "easy meat" standing out like a sore thumb. And that does not even start on the audits in some parts of Glasgow which you were forbidden to leave on foot after say 5.00 p.m.

Not all places were as good as that. EG The East End slaughter house where the rats were as big as the cats, or the dairy farm at the end of a track where you really weren't that keen on putting your wellies back in the car. Or one place that I spent a couple of weeks at that was so cold that when I got out of the car I put layers of clothes on, including coat, hat and gloves and only took them off after sitting in the car with the engine running for about half an hour. All 3 of those were packed lunch places, though I preferred to skip lunch and go home an hour earlier at those ones.

Luckily, violence against me was never a risk, as far as I was aware.

Slarti

Nothing beats Stornoway- I would be sent up for 2-3 weeks as Chalmers Impey (predecessor firm) had once had an office there. Horizontal rain, trees scarce so no shelter, nothing to do on a Sunday (could not work or do anything and you even had to order your Sunday evening meal on the Saturday night) but really great people- I used to order really cheap food for most of the week then on Saturday night have the three courses, bottle of wine and large drink to follow- this also helped eliminate a good chunk of the nothing to do Sunday.

[Lootman]

Nothing beats Stornoway- I would be sent up for 2-3 weeks as Chalmers Impey (predecessor firm) had once had an office there. Horizontal rain, trees scarce so no shelter, nothing to do on a Sunday (could not work or do anything and you even had to order your Sunday evening meal on the Saturday night) but really great people- I used to order really cheap food for most of the week then on Saturday night have the three courses, bottle of wine and large drink to follow- this also helped eliminate a good chunk of the nothing to do Sunday.

Stornaway is on the west side and so positively balmy compared with Peterhead, where I once had the misfortune to spend a Hogmaney.
As one local wag who worked at the prison (the biggest employer there?) put it to me: "We have two seasons here - winter and June".

Then on the way back to England my Triumph Vitesse ran out of petrol because all the petrol stations were closed, even on the A74. On the Beattock grade just for extra fun and warmth. I rang AA on a phone-box and, as the pips went, realised that the coin I had prepared to insert had frozen to the metal shelf of the phone-box.

A very long cold wait. The AA gallon of petrol got me across the border, just. It was so cold my eyes hurt. I haven't been back.

[Charlottesquare]

Nothing beats Stornoway- I would be sent up for 2-3 weeks as Chalmers Impey (predecessor firm) had once had an office there. Horizontal rain, trees scarce so no shelter, nothing to do on a Sunday (could not work or do anything and you even had to order your Sunday evening meal on the Saturday night) but really great people- I used to order really cheap food for most of the week then on Saturday night have the three courses, bottle of wine and large drink to follow- this also helped eliminate a good chunk of the nothing to do Sunday.

Stornaway is on the west side and so positively balmy compared with Peterhead, where I once had the misfortune to spend a Hogmaney.
As one local wag who worked at the prison (the biggest employer there?) put it to me: "We have two seasons here - winter and June".

Then on the way back to England my Triumph Vitesse ran out of petrol because all the petrol stations were closed, even on the A74. On the Beattock grade just for extra fun and warmth. I rang AA on a phone-box and, as the pips went, realised that the coin I had prepared to insert had frozen to the metal shelf of the phone-box.

A very long cold wait. The AA gallon of petrol got me across the border, just. It was so cold my eyes hurt. I haven't been back.

It's actually on the East of the Hebrides (sort of) but of course to the West of the Scottish mainland. Peterhead will possibly be like Aberdeen where I did my postgrad for a year, walk out in the morning in January, breathe in, and sear your lungs with the cold.

I am nearly immune to cold, as a child we lived up on the south side of the Pentlands on a very exposed site on the hill above West Linton, one year snow drifts on one side of the house went up over the windows, great fun if you are five years old but not so good if you are my father with an office in Edinburgh to try to get to.

[Charlottesquare]

Luckily, violence against me was never a risk, as far as I was aware.

Slarti

I have actually just denigrated Castlemilk in error, sorry Castlemilk (age impacting my memory), it was actually Drumchapel Station as I was heading for Dumbarton at the time.