Understanding how attorneys manage property deposits

With banks tightening up on lending, many more purchasers are paying for their properties with cash, or at least part of it in cash, thus making it important for buyers to understand how attorneys manage their money while in trust, advises Brett Nicholson of Shepstone & Wylie Attorneys property department.

"In most cases the sale agreement will have a clause which provides that this cash deposit, or the full purchase price, is to be paid over to the transferring Attorney on a specific date prior to the actual transfer taking place," adds Nicholson.

He explains that the attorney will deposit this money into their trust account for the client. "Clients should remember that they have the option of requesting that the money be invested in an interest bearing account at a bank and may sign an investment instruction authorising the Attorney to do so. The interest accrued during this investment will then be paid back to the client once the investment account has been closed, or when it gets closed on transfer of the property."

If the client should choose not to have the money invested then the Attorney would keep the money in their Trust Account until the property is transferred. "However it is very important to understand that in this case the interest received from the money being left in the Attorneys Trust Account will go to the Attorneys Fidelity Fund and not to the client," comments Nicholson.

He adds that it is, therefore, critical that people are aware of this so that as soon as they pay money across to the Attorney for the purchase price of a property or as a deposit on the purchase price of a property that they inform their Attorney straight away that they would like their money to be invested on their behalf so that they receive the interest gained thereon upon transfer of the property. They must then sign an investment instruction form and this permits the Attorney the authority to invest your money on your behalf. Without this signed form the Attorney will not be allowed to invest your money with a Bank.

Below is a breakdown of exactly what an Attorneys Trust Bank Accounts will consist of and who gets the interest thereof:

  1. Section 78(1) Current banking account
  2. Section 78(2)(a) Investment account which consists of trust moneys of various clients which are not immediately needed.
  3. Section 78(2A) Investments made on behalf of clients.

The interest on the accounts in paragraphs 1 and 2 will accrue to the Fidelity Fund while that in paragraph 3 will accrue to the client.

Therefore next time you pay money to an attorney as a deposit or as the full purchase price of your new property, advises Nicholson, make sure that he or she invests your money in terms of Section 78(2A) and in doing so you will receive back the interest gained whilst your money is with your Attorney.

Article from: www.rodneyhayter.com