The Ministry of Law is proposing that law firms set up a new type of bank account – a conveyancing account – for lawyers to hold funds entrusted to them by homebuyers and sellers.
The pilot trial of the new scheme could take place as soon as April this year, with the entire scheme taking off as early as next year, BT understands.
These conveyancing accounts will have a host of security measures in place to make sure that lawyers cannot abscond with clients’ money, such as requiring signatures from both the buyer’s and the seller’s lawyers before any money can be moved.
‘A home is often a person’s most substantial asset. The money intended for its purchase and arising from its sale should be properly protected,’ the Law Ministry said in a statement yesterday.
The proposed changes follow the infamous case involving lawyer David Rasif, who ran off with some $10 million of his clients’ money in 2006, as well as other recent cases in which lawyers absconded with their clients’ conveyancing money.
Conveyancing money, which is used for housing transactions, includes stamp duty payment and option deposits. A seller receives an option deposit – typically 4 or 9 per cent of the purchase price, which a buyer pays – once the option to purchase is exercised.
The law currently does not prohibit lawyers from holding clients’ conveyancing money.
In a public consultation paper released in August 2009, the Ministry of Law suggested prohibiting lawyers from holding any conveyancing money. The Singapore Academy of Law (SAL) will be the main entity appointed to hold conveyancing money, the paper said then.
But after public feedback – which included suggestions to allow banks to hold conveyancing money – the ministry has made revisions to the proposed measures. A second public consultation paper was released today.
Under the newest set of measures, approved banks will be permitted to open conveyancing accounts for law firms. But, as an alternative, buyers and sellers may still choose to use the service provided by SAL to hold option deposits in private property or HDB industrial/commercial property transactions.
The Law Ministry also said that a central signature repository will be established to allow the approved banks and SAL to check the signatures.
A pilot trial of the proposed measures will be conducted soon. BT understands that about 30 law firms and the three local banks – DBS Bank, United Overseas Bank (UOB) and OCBC Bank – will be involved in the pilot, which could take place in April and May this year. The new measures could be implemented in early 2011, sources said.
Lawyers welcome the new proposed measures, though they add that it will mean more time for administrative procedures, such as getting the counter signatures.
They also highlight some concerns. For one thing, they say the cost to customers could increase if banks charge a fee for the conveyancing accounts. For another, the interest earned from these accounts will be kept by the banks, as opposed to the current practice where interest earned from law firms’ client accounts is returned to the clients.
Source: Business Times, 18 Jan 2010