What Is Escrow And Is It Used In The UK?
Posted on 1st April 2020
Currently, MG Legal, your Conveyancing Solicitor Lancaster, operates the standard Solicitor’ financial arrangement of having two bank accounts, one for Office (the firm’s) funds and Client (your) funds with the two never meeting. Money is transferred in the form of costs from Client to Office account on presentation of a bill for our costs to clients, however, client’s own money never moves from Client account to Office account.
As property Solicitors, we have a qualified internal Legal Cashier, who carries out the day-to-day management and audit of all transactions, which must be signed off by a Solicitor, usually the Principle Solicitor of the firm before monies can be transferred out to their intended recipient. Our accounts are audited by independent, outside accountants for both HMRC and the Solicitors Regulation Authority to ensure they are in compliance. Even your local solicitors need to keep HMRC happy.
The largest sums we regularly see at MG Legal, your Conveyancing Solicitor Lancaster, are those involved in purchase and sale of property. Our property solicitors deal with many property sales and purchases on a weekly basis, and the property prices very, hugely. These sums can be for tens of thousands of pounds up to many hundreds of thousands of pounds for larger properties.
However, more and more firms are looking to try Third Party Managed Accounts, where an outside provider holds client money. In the USA, this is routinely used and is known as “Escrow” where a third party waits for the ‘nod’ from one party that they have received the transfer of the property, before releasing the money to the vendor.
Did you know many of us already use this daily?
Have you ever bought anything on eBay? You’ve used a type of Third Party Managed Account – PayPal. PayPal take money from you and if your items does not arrive, or it is not as described, you have the protection of being able to claim the purchase price back.
Credit cards work on a similar, although slightly more complex principal, in that if you purchase a higher value item and it fails or does not materialise, you can make a Section 75 claim for the value of the purchase.
Benefits of Third Party Managed Accounts
Third party managed accounts can take a high pressure item off the plate of the Solicitor handling your Conveyance, allowing them to take more time with chasing the next link in the property chain or reviewing your purchase enquiries.
The Third Party Managed Accounts are also painted as being more secure, with an organisation dedicated only to secure management and transfer of your funds, they can spend more time on security, have less obligations to comply with and their sole interest is securing monies from start to finish.
It is also a selling point that it makes the Solicitors Accounting Reports simpler to produce, because the daily flow of money in and out of the firm does not include those high-value Conveyancing sums.
Drawbacks of Third Party Managed Accounts
We all know the adage “Too many cooks spoil the broth” and Third Party Management services are, certainly, another cook in the kitchen. The sums of money transferred will still need to be verified by both side’s Solicitors, clients and in most cases, Mortgage Providers also. We have all played Chinese Whispers at some point too and the addition of an extra clerk in a remote office, inputting your bank details, leaves something to be desired. At MG Legal, your Conveyancing Solicitor Lancaster, we take care to obtain your details including bank details from you directly and to compare any transfers with your own bank details as provided during the Conveyancing process.
The Third Party company will still need to be furnished with various account details and come completion day, particularly when dealing with a large chain of properties each dependent on the last to swiftly move on and to ensure that, say, ten properties all complete in one day, every minute counts.
Many banks have a cut-off point for transfers of 15:00, some are earlier, meaning that even a five-property chain started at exactly 09:00 has only 70 minutes for each transaction to complete to ensure the last one is in the system by 15:00. When dealing within the firm, it is a simple matter for your Conveyancer to speak to the Legal Cashier, who is usually in the same room, to verify receipt of funds – a process that might take five minutes including logging into the relevant bank account.
Most of us have tried to call banks and to pass security after sitting on hold for several minutes if not half an hour and so concerns would be very real about time-sensitive completions.
Will MG Legal be using Third Party Managed Accounts soon?
No, not until the system is well established and we have a lot more information about how the systems will be implemented. Our client’s wellbeing, peace of mind and successful, swift completion of your Conveyance is at the top of our list of priorities.
For the time being, we are absolutely happy to continue to use the system that has served both the firm and its clients well throughout the lifetime of the firm. We believe that the peace of mind afforded by knowing you will speak to your Conveyancing Solicitor directly and that they will speak directly to the Accounts department and the Legal Casher responsible for sending payments, gives us no reason to change our methods. We cannot see any better system that keeping the transactions within the four walls of our Conveyancing department.
Only when the system is absolutely tried and tested would be consider allowing anyone else to have a hand in our client’s sale, purchase or both.
See for yourself
The current Coronavirus restrictions notwithstanding, we believe that one of our most important features is the ability for Conveyancing clients to come in and see their Conveyancing Solicitor. If you come to see your Solicitor, you will see where they work and get to speak to them face-to-face. Even though we do most of our communicating with clients over the phone and by email, we believe that even a few minutes of time during an initial meeting to complete the primary documentation will give you the confidence that our Conveyancing Department will handle your matter efficiently and professionally whilst being approachable and ensuring that you are absolutely up to date with your matter.
Get in touch with MG Legal, your Conveyancing Solicitor Lancaster and we will aim to have a comprehensive and highly competitive quote for your sale and/or purchase to you via email within a few minutes of speaking to you. Simple confirm your agreement to the quote and we will have the ball rolling the same day.
MG Legal – Your Local Solicitors
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