Interest on money held in solicitors' client account

[alaningus]

my mother in law completed on the sale of her house on 26th August (for about £180,000.

For various reasons, completion on her purchase won't occur until around the end of September.

We enquired whether any interest was due on her money being held in the solicitors' client/general client account and were told that the interest rate is zero.

Can this be correct? I thought they had to pay a reasonable rate of interest for sums over a certain amount over a certain minimum period.

[factor-fiction]

It could well be right- interest rates are so low at the moment - base rate is only 0.5%. I'll try to have a look later to see if the Solicitors Accounts Rules specify a minimum rate. At 0.5% for a month you'd be talking about £75

[sandyRoe]

If she had the money herself there wouldn't be a great deal of interest to be had on it anywhere just now.

[ladybirder]

Don't understand, you say <<my mother in law completed on the sale of her house on 26th August (for about £180,000. >>

Then you say <<For various reasons, completion on her purchase won't occur until around the end of September. >>

So if she completed on 26th August she should have the money in her account now but if she's not completing till end Sept then she gets the money end of September. So my question is when did she actually complete?

[alaningus]

@Ladybirder - she sold her house on 24th August (ie money transferred for purchaser) but will not complete (ie pay for) the purchase of her new house till end of September.

@Factor @Sandy Looking around, she could easily get around 3% from an instant access account. Even Natwest are offering 1% which on @Factor calculation would equate to about £150. Not to be sniffed at, especially if it was three times that (ie 3%)

[ladybirder]

Thanks for explaining alan. In view of the gap between sale and purchase I would have expected YOUR MOTHER'S money to be forwarded to her for the interim. Bit late now I suppose but I would have asked for it.

[factor-fiction]

I'm not sure why but I don't think that businesses get the sort of rates that banks give to private customers to attract them in.
Have a look at some bank websites and see what rates they offer to businesses. I may be wrong but I doubt that businesses can get 3%

[alaningus]

@ladybirder - Had we forseen the delay, I would have definitely suggested it. But alas, due to circumstances, we couldnt ! Even so, I find it difficult to believe that any solicitor that handles large amounts of client money (even for short periods) would have it in an account that pays no interest at all...

[factor-fiction]

The bank knows that money held in a client account may not be there long and therefore may not be able to make use of it. In a way it is looking after the money for the solicitor and rather than getting interest the solicitor is perhaps lucky not be charged a fee by the bank. In my experience interest rates on such accounts are low. I recall they were around 2% when base rates were 5% so I wouldn't be suprised if the interest rate was zero now. In some countries now the rate of interest is NEGATIVE (-0.5% I recall in Switzerland and Japan)

[bednobs]

wow i never even knew you could get negative interest. Does that mean if you have money in a bank you pay thwm interest?

[alaningus]

@factor - I suspect you're right. Despite using the word "attractive" when referring to interest rate applicable to commercial client deposit accounts, they appear to be in the region of 0.1% at present !

[bednobs]

my maths is rubbish but does that make £1.75 interst?

[factor-fiction]

No- I reckon it would be around £17 interest based on 0.1%pa for 5 weeks.
But you may find that tax is payable on that interest by your MIL

[alaningus]

Thanks everyone for all the answers/interest.

Don't really mind as long as someone isn't profiting at her expense.

Cheers

[scotman]

Just a thought; I have no knowledge of business-type accounts but it may be that the solicitors are charged by the bank for operating this account. The interest payments may be used to defray some of this cost.

[factor-fiction]

Yes bednobs- in a few countries there is a negative interest rate of -0.5% I recall. Money Box this week mentioned it. In effect customers pay the bank interest for holding the customers' money. I think it mainly affected high earners and businesses who were happy to pay for the security of knowing that their money was safe in these banks

[bednobs]

christ, if my bank asked me for interest i'd stick it in the matress

[factor-fiction]

http://johanlinden.co...est-rate-swiss-franc/

I think this has happened in Japan too in the last few years

[Eve]

Have a look at rules 24 and 25 here (Solicitors' Accounts Rules):

http://www.lawsociety...ds/Profethics_SAR.pdf

[ubasses]

Solicitors have both clients accounts and clients deposit accounts. The deposit account is usually has the clients name in the title and a separate account opened for each client for funds being held long term. In the above situation when it is being held for a short period before being paid away it will most likely go in their general clients current account. No interest being paid. to do anything else the admin costs would outweigh the benefit of any interest earned

[smurfchops]

I had lots of problems with a bad solicitor on my dad's probate. I wasn;t going to let them get any money they weren't entitled to, and made sure I got the interest as well. They paid up, no problem.