The definition of clients’ money is extremely wide. It includes all money over which you have exclusive control yet which does not belong to you or your practice.
Here are just a few examples:
- rents;
- fees received from a client for payment to another agency, e.g. planning fees or mortgage valuation fees collected;
- service charges collected by a practice managing a property;
- deposits and money paid by a client on account of disbursements before they are actually incurred;
- money due to be paid to other contractors;
- fees taken in advance – for arbitration, for instance;
monies held by members appointed as Receiver under the Law of Property Act 1925.
If properties are owned jointly by a principal of a practice (whether a member or not) with a person other than a principal, the principal is a trustee with the co-owner. A trustee is not beneficially entitled to money held for another person. He is acting for the trust and such money must be paid into a client account.
Further reassurance for clients
RICS has recognised a gap in the protection of clients money. If clients' money is "lost" and a member is unable to repay the loss, the client can claim against the Clients' Money Protection Scheme.
Subject to the policy conditions the scheme will meet a claim up to the limit of £50 000. Your clients therefore have the added protection of the scheme in addition to the protection afforded to them by your professional indemnity insurance. Clients therefore have a further reason to use our members.
A leaflet for clients entitled 'protecting your money' is available from the RICS contact centre T +44 (0)870 333 1600 E contactrics@rics.org.
Exemptions
Clients’ money does not include all money that passes through your practice. For instance, you cannot treat yourself as a client, and handle your own money through a client account.
If a practice acts as an agent for properties owned by one or several partners of the practice, any money received is not clients’ money and should not be put in a client account.
If a client can separately withdraw money from an account and you therefore don’t have exclusive control over the account, it is not clients’ money for the purposes of the Rules.
If you operate such accounts you must notify your clients in writing that they are not regulated by RICS and not covered by the RICS Clients’ Money Protection Scheme (see Rule 18).
Similarly, clients’ money does not include money held in an account jointly with a third party who is not a client and over which you do not have a power of withdrawal on his sole signature or that of any connected person or employee of his practice.
For instance, members sometimes hold money in a joint account with another practice. In all such cases, a separate record should be kept in respect of money held, even though it is not clients’ money for the purposes of these Rules.
This could occur when a client is in dispute with the client of another surveyor and both surveyors agree to hold money in a joint account until the dispute is resolved.
And, finally, a float put in by you to keep a client account in balance does not count as clients’ money, and may only be deposited within the provision of Rule 19(c).
On the face of it you may think that this Rule may give the necessary authority to “top up" a client account, but this is not so. This Rule is restricted to the nominal sum (if any) required by a bank or building society to open or maintain a client account. Any float should be removed as soon as it is no longer required.
If a client account does not hold sufficient money on behalf of a particular client to make payments required as a matter of emergency on behalf of that client, it is open to you to use your own or your practice’s money and seek reimbursement later.
It is a breach of the Rules to use monies held on behalf of a client or clients for the benefit of another client or clients. Where you are proposing to use your or your practice’s money, you should not pay it into your client account but should pay it directly to the third party.
