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Joint Account or Client Account?

Updated: Jul 10, 2021

So the SRA Accounts Rules 2019 were published in an attempt to simplify the rules, right?! Rather having to thumb through pages and pages of prescriptive rules in the 2011 version, the latest version is much easier to navigate, but some of the finer detail is no longer available within the rules themselves.

Ever wondered about the differences between joint accounts and client accounts, here are some scenarios of when a joint account might be used.

Joint accounts are not client accounts (where an external party has joint control) but the funds held therein are client money. A client account is described as being an account of the practice held at a bank or building society for the purposes of holding client money.

By default therefore a joint account cannot be a client account if it is held between two parties, one of which is external to the practice. A joint account may be held jointly with the client, another practice or a third party. But what if both parties belong to the same practice? Where a joint account is controlled by two individuals working within the same firm, perhaps as joint trustees, the account will be classed as a client account as it is deemed as being controlled by the practice.

Joint accounts afford the protection from both parties and are often required, perhaps due to a contractual agreement that states funds are to be held jointly, and with equal control given to both parties. A good example of this is a contract relating to a sewer or road retention which may stipulate that the retention monies are to be held in the joint names of the seller and purchaser’s solicitor until such time it is agreed who the money should be paid to.

Due to their own increased regulatory demands that banks or building societies must comply with and the increased administration necessary by firms, joint accounts are slowly becoming less popular. Many firms use “undertakings” [a professional obligation that binds a lawyer/solicitor to do, or not to do, something] in lieu of opening a joint account. One firm will undertake to retain the funds and will not withdraw the money without the expressed authority of the other party, the other party is given confidence by a binding agreement and that the firm holding the funds are required to abide by the accounts rules in full whilst the money remains in a client account.

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