Many Agreements of Sale contain a clause to the effect that the conveyancer is to place the purchaser’s deposit in an interest bearing account. All monies received by an attorney on behalf of a client is paid into the Attorneys Trust Account where it is covered by the Legal Practitioners Fidelity Fund against misappropriation. The interest earned on funds whilst in the trust account is required to be paid to the Legal Practitioners Fidelity Fund.
In terms of the Legal Practitioners Act 5% of the interest earned on an investment must be paid to the Legal Practitioners Fidelity Fund.
Most clients want interest to be earned on their deposit. Section 86(4) of the Legal Practice Act 28 of 2014 allows legal practitioners to invest client monies in a separate trust savings account where there is an underlying transaction with an explicit mandate from the client to do so. The authority set out in a Sale Agreement does not suffice.
In order to comply with the Act aforesaid the Conveyancer must get an Investment Authority signed by the client. This document basically sets out which Bank/s the client authorises the Legal Practitioner to invest in, the administration fee of the Legal Practitioner to attend to the investment and discloses the payment to the Fidelity Fund of the 5% of interest received.
Simultaneously with the signature of the document and before the Conveyancer can open an investment account the purchaser must provide their FICA documentation.
Written by: Bruce Forrest