Conveyancing Accounts & Other Accounts

Question 1

What does it mean if a buyer’s deposit is held by the seller’s solicitor as stakeholder?

Answer 1

The deposit is held jointly on behalf of both the buyer and the seller during the period between exchange of contracts and completion. On completion, the deposit belongs to the seller.

Question 2

What does it mean if a buyer’s deposit is held by the seller’s solicitor as agent?

Answer 2

If a buyer’s deposit is held by the seller’s solicitor as agent, it is held on behalf of the seller only. This means that the deposit belongs to the seller from exchange of contracts rather than on completion.

Question 3

Firms can use one of 2 methods when recording the receipt of a stakeholder deposit on exchange of contracts:

Answer 3

1. The firm can operate a separate stakeholder ledger in the names of both the buyer and the seller. On completion, the deposit can be transferred from the stakeholder ledger into the seller’s client ledger.
2. The firm can record the receipt of the stakeholder deposit in the seller’s client ledger BUT it must be very clearly labelled as stakeholder money.

Question 4

What are the accounting entries for stakeholder deposits in a separate stakeholder ledger?

Answer 4

1. Receipt of the stakeholder deposit on exchange of contracts - CR stakeholder client ledger client account, DR cash sheet client account.
2. Transfer of the stakeholder deposit on completion - DR stakeholder client ledger client account and CR seller’s client ledger client account.

Question 5

What are the accounting entries to record stakeholder deposit held in the seller’s client ledger?

Answer 5

CR client ledger client account, DR cash sheet client account.

The details column of the client ledger must clearly identify that the deposit is held as a stakeholder deposit.

Question 6

Deposit held as agent. If the contract terms provide for the buyer’s deposit to be held by the seller’s solicitors as agent for the seller:

Answer 6

The deposit belongs to the seller from exchange of contracts.

The receipt of the deposit will be recorded directly into the seller’s client ledger:

CR seller’s client ledger client account, DR cash sheet client account.