Govt suggests that such funds be held by Law Academy or banks
LAWYERS may soon be prohibited from holding conveyancing monies if a new proposal by the Ministry of Law goes through.
This follows the infamous case of lawyer David Rasif running off with some $10 million of his clients' money in 2006, as well as a string of recent cases in which lawyers absconded with clients' conveyancing money.
Aimed at preventing lawyers from holding large sums of cash for their clients, the new move is unlikely to dampen business in this area of legal work, market watchers said.
Conveyancing money refers to money used as part of transactions for housing purchases. This includes stamp duty payment and option deposits.
A seller receives an option deposit - typically amounting to 4 or 9 per cent of the purchase price which a buyer pays - once the option to purchase is exercised.
In a public consultation paper released yesterday, the ministry has suggested having the Singapore Academy of Law as the main entity appointed to hold conveyancing money.
The option deposit can also be held by entities approved and appointed by the Ministry of Law.
The three local banks have also been engaged to look into offering services in this area.
'We have been in discussions with the Ministry of Law on the possibility of providing the service to hold the option deposit,' said Chow Theng Kai, head of cash management, group transaction banking, at OCBC Bank.
Lawyer Gan Hiang Chye from Rajah & Tann LLP told BT that this move would not take away any business.
'The law firm will still be doing the administrative work for the client,' he said, noting that the clients can use a cashier's order to be paid to the respective parties, but this can be deposited by the law firm.
'The legwork is still being done by the law firm for the client. The client just has to make one small visit to the bank to buy the cashier's order.'
He added that the recent cases of lawyers absconding with clients' money has 'diminished' the profession.
The proposed changes come after Chief Justice Chan Sek Keong expressed concern last year that such criminal conduct of lawyers harms not only the reputation of the legal profession, but also the victims who could not get full compensation.
This is despite tightening the Solicitors' Accounts rules in July 2007, such that no sum exceeding $5,000 can be drawn unless two lawyers okay it.
With the amendment, a lawyer also could not receive or hold conveyancing monies unless he had at least two signatories to his client account.
A review committee chaired by Justice VK Rajah was then set up to look into making changes to the conveyancing system.
The central recommendation to prohibit lawyers from receiving such monies was made in the committee's report.
The Chief Justice agreed with the recommendation and forwarded this to the Ministry of Law.
The proposed changes are likely to be implemented at the end of the year.
Source: Business Times, 12 Aug 2009