The role of the statutory Trust account.
Did you know that in the days leading up to settlement it is not at all uncommon to need a statutory trust account in order to facilitate a smooth settlement? No. Most clients don’t, but it can make the difference between an on time settlement and or a delay.
What is a Statutory Trust Account?
A Statutory Trust Account is a third party account used by responsible parties to hold other peoples funds. The funds deposited in the account are used under the direction of the owner of the funds.
“Is my money safe?”
The obvious question often asked by clients when we discuss using our Statutory Trust Account is –
“Is my money safe?”. The answer is YES! on a number of levels. First of all, Lawyers take the use of their Statutory Trust Account very seriously. We understand that we enjoy the privilege to manage a trust account and that that privilege is easily lost. To that end, all firms are required to put in place processes and procedures that manage the administration of their trust account. The Trust Account is also Audited twice per year in order to ensure compliance.
Secondly, as a firm, funds deposited in to our Statutory Trust Account are covered up to $2million by the Fidelity Fund. This is a fund put in place to insure deposited funds are covered in the event of fraud by a practitioner. This means that in the unlikely event your funds are fraudulently taken from the Trust Account, the practitioner responsible would be pursued for both civil and criminal penalties (including the loss of their ability to practice as a lawyer) AND you would be protected by the fidelity fund who would replace the stolen funds. All in all – you are protected.
What purpose do trust accounts serve in property settlements?
Purchasing property is one of the few occasions where large amounts of funds are required in one place at any given time. Given the restrictions imposed by banks to limit fraud, consolidating those funds and making them available even with modern advances in internet banking can be difficult. Fortunately, working with a conveyancer or lawyer who manages a trust account means as a customer you can take advantage of a centralised repository in which to deposit funds allowing the lawyer to draw cheques on your behalf on the day of settlement.
Yes! I know that sounds late, but in reality we are dependent on the other side of the transaction to provide cheque directions. This means last minute directions on funds are not at all unusual.
When it is particularly relevant
Special mention goes to those clients who are with a minor bank. It is especially important when selecting a conveyancer or property lawyer that you consider the importance of working with an advisor who has the facility available. Whilst many of the larger banks will provide an offset account, it is unusual for smaller banks to do so. This can present a practical constraint to your ability to settle on time.
Buying property is a stressful process and in the absence of repeated purchasing experience it is often easy to overlook some important elements the process. Being tricked into a low upfront price that doesn’t meet your needs can be frustrating. Similarly, the costs of a delay to settlement (in the form of penalty interest) are very expensive.
When buying conveyancing services we encourage our clients to first get some understanding about the services they do and don’t need, understand the importance of key elements in the process including the searches, the trust account, professional indemnity insurance and advocacy in order that they can make an informed decision. We are proud of our distinguished record as then no.1 Conveyancers in Australia.
Read more at Think Conveyancing.