Homebuyers could face higher conveyancing fees under Government proposals to redirect some of the interest earned on money held in solicitors’ client accounts, the Conveyancing Association has warned.

The trade body has renewed its opposition to the proposed Interest on Lawyers’ Client Accounts (ILCA) scheme amid signs the Ministry of Justice may be pressing ahead with the policy.

Under ILCA, a proportion of the interest generated by money temporarily held in legal client accounts – including funds handled during property transactions – would be redirected into a central fund to support access to justice.

The Conveyancing Association argues that removing this income would increase costs for conveyancing firms, with some potentially having little option but to pass those costs on to homebuyers and sellers.

IMPLEMENTATION CONCERNS

The MoJ consulted on the proposals earlier this year, with the consultation closing on 9 March. Its formal response has yet to be published.

However, the CA said reports that the department has advertised for a Head of Additional Funding Policy, whose responsibilities would include supporting the “design, legislation and implementation” of a scheme funded by interest on legal client accounts, raise questions over whether a decision has already been made.

The Association argues that interest earned on client accounts should not be viewed simply as additional profit for conveyancers.

It said the income helps firms meet the costs associated with holding and protecting client money, including banking charges, audits, anti-money laundering controls, fraud prevention and compliance systems.

Those costs would remain if the interest was redirected elsewhere.

IMPACT ON HOME MOVERS

The CA also questioned how the proposals fit with wider Government efforts to make buying and selling property cheaper, quicker and less prone to delays and fall-throughs.

Beth Rudolf (main picture, inset), director of delivery at the Conveyancing Association, said: “We made our position very clear when we responded to the consultation earlier this year, and nothing that has happened since has changed our view ILCA would be bad news for conveyancing firms, their clients and the wider home moving market.

“What is particularly disappointing now is that the consultation closed six months ago and we are still waiting for the MoJ’s formal response, yet it appears to be recruiting someone to work on the design, legislation and implementation of the scheme.

“That inevitably raises questions about the process. If the Government has not yet reached a decision, then we would like to understand why it is recruiting for a role framed in these terms before it has responded to the very serious concerns raised during its own consultation.”

‘SOMEBODY WILL HAVE TO PAY’

She added: “We continue to wholly reject the suggestion client account interest is somehow money without a purpose. Running client accounts safely and properly costs firms significant sums of money, and the interest generated helps meet those costs. Taking away that income does not take away the costs, and ultimately somebody will have to pay for them.

“For conveyancing firms that means either absorbing another significant cost, which many simply cannot do, or passing it on through higher fees to home buyers and sellers.

“At the same time, the Government is rightly trying to improve the home buying and selling process and reduce the wasted cost of fall throughs and delay, so introducing a measure which could have precisely the opposite effect makes little sense.”

‘A STEALTH TAX ON EVERYONE’

And she said: “We fully support the need for a properly-funded justice system and access to justice, but that is a responsibility which should be met through fair and transparent public funding. It should not be achieved by imposing what amounts to a new charge on one part of the legal profession and, ultimately, its clients.

“Government should remember conveyancing firms already pay corporation tax on this income so the Government is already getting its share – the tax it receives will drop if conveyancers are no longer receiving the interest on client accounts. Which makes you wonder if ILCA is simply a stealth tax on everyone?

“We would therefore urge the MoJ to publish its consultation response immediately before taking any further steps towards implementation, to listen carefully to the strength of opposition across the profession, and to reconsider whether ILCA is either a fair or sensible way to fund the justice system.”