Property transactions

Question 1

What is stakeholder money?

Answer 1

Stakeholder money is a deposit a firm may receive when acting for the seller of a property.
The firm holds the money jointly for the buyer and seller. It does not become the property of the seller until completion takes place.

Question 2

How should a solicitor record stakeholder money?

Answer 2

A solicitor can record stakeholder money in two ways:
● Method 1: Show the stakeholder money on the seller’s ledger account, but clearly label it as stakeholder money held for both the buyer and seller.
● Method 2: Create a separate stakeholder ledger account in the joint names of the client and buyer and credit the stakeholder money to that account

Question 3

What happens to stakeholder money upon completion of the property sale?

Answer 3

Upon completion, the firm holds the stakeholder money for the seller alone. An inter-client transfer must be made from the joint stakeholder ledger account to the seller’s ledger account.

Question 4

How should a solicitor handle a mortgage advance when acting for both the buyer and the lender?

Answer 4

The solicitor can choose between two methods:
● Method 1: Credit the mortgage advance to the borrower’s ledger account upon receipt, including the lender’s name and the fact it is a mortgage advance in the details column.
●Method 2: Credit the mortgage advance to a separate ledger account in the lender’s name upon receipt. On completion day, transfer the funds to the borrower’s ledger account via an inter-client transfer

Question 5

How are professional charges handled on a mortgage advance when the buyer agreed to pay the lender’s costs?

Answer 5

●Debit the buyer’s ledger account with the fees charged on the purchase and VAT.
● Credit the profit costs account and HMRC account with the fees and VAT.
● Debit the lender’s ledger account with the fees charged on the mortgage and VAT.
● Credit the profit costs account and HMRC account with the fees and VAT.
● Transfer the debt from the lender’s ledger account to the borrower’s ledger account.

Question 6

What are the key takeaways regarding inter-client transfers in property transactions?

Answer 6

● When a firm begins holding client money for a different client, it must open a client ledger account for the new client (the transferee) and record an inter-client transfer of the money.
● A deposit received as stakeholder money necessitates an inter-client transfer on the completion date to show that the deposit is now held for the seller alone.