Property Transactions

Question 1

Can the receipt of stakeholder money be entered in the normal way fora receipt of client money?

Answer 1

• Yes the entires would be:
• DR Cash Account (client section) and CR Seller’s ledger account.
• When making the CR entry however, fir’s must note on this entry that the money is held as a stakeholder for the buyer and seller.
• Alternatively the firm could open a new Joint Stakeholder Ledger Account and make the CR entry in there.

Question 2

What happens to the money once completion has taken place?

Answer 2

The firm will then hold money for the seller alone.

If the money was held in a separate stakeholder account (and entire don this ledger) then an inter-client transfer of this money must be made to the Seller’s ledger account. Such an entry would appear as follows:

DR Joint stakeholder ledger account and
CR Seller’s ledger account
(both in client section).

Question 3

Briefly explain the two methods of recording money received which available to a firm, in situations where they act for both the buyer and the lender in a property transaction.

Answer 3

1) Mortgage advance credited to borrowers ledger account when received. Details column must include the name of the lender and the fact it is a mortgage advance.

2) Mortgage advance is credited to a separate ledger account in the name of the lender on receipt. On completion, funds become available to the borrower, so an inter-client transfer must then be made to the borrower’s ledger account.

Question 3

Give the entries for a deposit received as an agent for the seller?

Answer 3

• Money received as an agent for the seller belongs to the seller alone and is credited to the seller’s ledger account.
• Entry is as follows:
  DR Cash Account (client section)
  CR Seller’s Ledger Account (client section)

Question 3

How is a bridging loan entered into the accounts?

Answer 3

As this is a personal loan to the borrower, once received it belongs to the borrower and not the bank. When received it must therefore be credited to the borrower’s ledger account, and not the ledger account in the name of the lender.

Question 4

Where do the entries for bills go when acting for both the buyer and lender?

Answer 4

• Commonly, buyer will agree to pay costs of lender.
• As such, bury will be paying the fees charged to the lender.
• The bills will need to be entered separately for the buyer and the mortgage (as costs and VAT must be debited to the person to whom the services are provided). After this the firm can transfer the debt from the ledger of the lender to the ledger of the buyer. this is done using the following entries:

CR Lenders ledger account, business section (fees charged and VAT as one figure); and
DR Buyer’s ledger account, business section (fees charged and VAT as one figure).

• If the firm have chosen not to have a separate ledger account for the lender, charges and VAT of lender will need to be shown on the borrower’s ledger account (and labelled accordingly).