LAWFUEL – The Law Newswire – The recent avalanche of finance company failures has highlighted the need for solicitors to be certain that funds that are transferred electronically to their trust accounts and which they are relying on to immediately complete transactions, are cleared funds and will not be reversed. At least two practitioners have been caught out.
Although the recent finance company failures have emphasised the issue, it is not confined to funds being transferred by finance companies. The need to ensure funds cannot be reversed applies to all payments received electronically.
In both instances that have been brought to the attention of the society so far, the advances made by a finance company through its bank were confirmed by fax to the solicitors together with a copy of the direct link batch receipt.
Relying on that advice, in one instance a refinancing was completed, including the immediate electronic registration of a mortgage to the finance company, and in the other, a purchase was completed.
Both advances were reversed the following day when the finance company was placed in the hands of the receivers, leaving the solicitors’ trust accounts significantly overdrawn. In today’s climate it is essential that all practitioners take steps to ensure that funds they will be relying on to complete transactions are cleared and will not be reversed.
The safest course for a practitioner will be to obtain that confirmation in writing from the bank which is making the deposit to the practitioner’s trust account. In both instances referred to above, the bank in question made no contact with the solicitors before reversing the payments. These examples serve as a timely reminder that we cannot be too careful.