The Conveyancing Association has set out firm opposition to Ministry of Justice proposals to redirect interest earned on lawyers’ client accounts into a central fund.

The trade body has responded to the Ministry of Justice consultation on its proposed Interest on Lawyers’ Client Accounts scheme, warning it would increase costs for buyers and sellers while placing further strain on an already stretched conveyancing sector.

The consultation proposes that interest earned on client money held by law firms should be transferred into a central fund to support the justice system, including legal aid and court services. Under the proposals, banks would continue to pay interest on client accounts, but firms would be required to pass a significant proportion of that income to the new scheme.

For pooled client accounts, the Ministry of Justice suggests that between 75% and 100% of interest would be taken, while for individual client accounts around 50% would be transferred. The proposals would apply to most client accounts, including those used for residential conveyancing, with interest collected monthly or quarterly and administered centrally.

The Conveyancing Association has rejected the approach in the strongest terms, arguing that interest on client accounts is not surplus income for firms. In its response, the Association says that for many practices this income helps cover the rising costs of running compliant client accounts, including banking charges, audits, anti-money laundering controls, systems and fraud prevention measures designed to protect consumers.

The Association warns that removing this income will not be cost free. Many conveyancing firms operate on tight margins and will be unable to absorb the loss, meaning higher fees for buyers and sellers. First-time buyers and those transacting at lower price points are likely to be most affected, with the Association describing the proposals as a stealth tax on the most vulnerable.

The response also highlights the potential impact on existing business models, including fixed-fee, high-volume and high-street firms, some of which rely on retaining client account interest, with client consent, to remain viable.

The Conveyancing Association adds that the proposals come on top of what it describes as increasing regulatory pressure, including duplicated anti-money laundering requirements and the need for firms to register as tax advisers to submit SDLT returns. It warns this could push more firms out of the market at a time when the number of active conveyancing practices is falling, even as transaction volumes remain high.

Concerns have also been raised about access to banking. The Association says many firms already struggle to open and maintain client accounts due to bank de-risking and anti-money laundering requirements, and that additional complexity could exacerbate the problem.

The response challenges the evidence used in the consultation, which suggests law firms do not rely on interest income. The Association points to data indicating that, for many firms undertaking property work, interest can represent a meaningful share of overall profit. It also rejects comparisons with overseas schemes, noting that legal fees in countries such as France and the US are significantly higher than those charged in the UK.

The Conveyancing Association has further criticised the short consultation period, arguing that firms have not been given sufficient time to assess the full impact on their businesses or on consumers. It has urged the Ministry of Justice to reconsider the proposals and engage more fully with the conveyancing sector before pursuing any reform.

Beth Rudolf, director of delivery at The Conveyancing Association, said: “Client account interest is not a spare pot of money that can be simply taken away from firms without consequences.

“For conveyancing firms, it plays a real role in funding the systems, controls and checks that protect consumers and allow transactions to proceed safely. Removing it does not make those costs disappear, it simply shifts them elsewhere and adds in additional administration costs.

“In practice, that means higher fees for all those requiring conveyancing services and advice, and real pressure on the firms delivering conveyancing services. At a time when access to banking is already difficult and capacity in the market is stretched, these proposals risk making the situation worse.

“This whole consultation and proposal feels ill-thought and rushed through. The consultation paper was only sent by MoJ to nine entities and not to any practicing conveyancers.

“Any reform needs to be based on proper evidence and a clear understanding of how conveyancing actually works, otherwise the impact on consumers and the housing market will be significant and undoubtedly negative in the extreme.

“We would urge the MoJ to reconsider these set of proposals and to consult with us on how to move forward.”