Sometimes you'll deal with situations where money doesn't fit neatly into the standard client account model. Joint accounts involve multiple parties sharing an interest in funds. Third-party accounts involve someone else holding or managing the money. You need to understand when these arrangements are permitted and what rules apply.
Getting these arrangements wrong can lead to serious compliance issues. Using a joint account improperly could mean holding client money alongside non-clients. Failing to supervise third-party accounts could mean you're not protecting your clients' funds. The SRA expects you to understand exactly when and how these special accounts can be used.
A joint account is a client account that holds money belonging to two or more clients who have a shared interest in the funds. This typically arises in property transactions where buyers or sellers are acting together, or in disputes where multiple parties are entitled to settlement funds.
A joint client account is simply a client account with more than one client named on it. The key principle is that ALL parties to the account must be your clients. You cannot hold money for a client and a non-client in the same joint account.
Common scenarios include property transactions where multiple buyers are purchasing together, executors who are also beneficiaries, family members acting together in a matter, or parties to a dispute receiving a joint settlement payment. The thread running through all these is that everyone with an interest in the money is your client.
Ask yourself: will more than one person have an entitlement to the funds in this account? If yes, you might need a joint account. But remember - all must be your clients.
All parties to a joint account must be your clients. This means you must have a retainer with each party, you must be acting for each in the matter, and each must have given you instructions. You cannot include a party who is not your client, even if they have a legal interest in the funds.
You need written authority from all parties to operate the joint account. This should specify who can give instructions for withdrawals, how signatures will be obtained, and what happens if the parties disagree. The authority must be clear and unambiguous.
You must document the joint account arrangement properly. This includes the written authority from all parties, clear identification of each client's interest in the funds, and instructions for how the money will be dealt with. Keep this documentation with your client files and reference it clearly in your accounting records.
Never assume that parties can act for each other on a joint account. If one client gives instructions, verify whether they have authority to act for all parties. When in doubt, get authority from everyone.
This is the golden rule: every party to a joint client account must be your client. You cannot hold money for a client and a non-client in the same account. If a non-client has an interest, you need a different arrangement - perhaps holding their share separately or using a stakeholder arrangement.
Including a non-client in a joint account would breach the SRA Accounts Rules. It would mean you're holding money for someone who isn't your client in a client account, which isn't permitted. It could also create conflicts of interest and questions about who you're actually acting for.
The SRA requires written authority for operating joint accounts. This protects you and your clients by making clear what instructions you can accept and how funds will be handled. Without written authority, you risk one client later claiming you shouldn't have followed another's instructions.
Withdrawals from joint accounts must be properly authorised. If your written authority requires all parties to sign, you can't release funds on one person's instructions. If the authority allows any party to give instructions, that's fine - but make sure this is clearly documented and agreed in writing.
If clients in a joint account disagree about what should happen to the funds, you may need to hold the money until the dispute is resolved. Don't take sides - follow your written authority and seek guidance if needed.
When money is received into a joint account, you need to record who contributed what. Your client ledgers should clearly show each client's interest in the funds. This matters because when it comes to paying out, you need to know who is entitled to what.
Payments out of a joint account must be allocated correctly to each client's ledger. If one party receives their share, reduce their ledger balance accordingly. Keep clear records of who authorised the payment and how much was paid to each party.
When you transfer costs from a joint account to office, you need to decide how to allocate them between the clients. This should follow your retainer agreements - costs might be shared equally, or in proportion to each party's interest, or one party might bear all the costs. Document the allocation clearly.
In property matters, sale proceeds often need to be distributed between multiple parties. You'll pay off any charges, deduct your costs and disbursements, then distribute the net proceeds according to each party's entitlement. Each distribution must be recorded against the relevant client ledger.
Even though money is held in a joint account, keep separate client ledgers for each party. This shows exactly what each person is entitled to and prevents confusion later.
Two clients are buying a property together. They each provide half of the deposit and will each contribute half to the completion funds. You hold their combined money in a joint client account. Each has their own ledger showing their £50,000 contribution. On completion, you pay £100,000 to the seller's solicitor, allocating £50,000 from each ledger.
You are administering an estate. Two executors are also beneficiaries and will each inherit half of the residuary estate. They are both your clients. You hold the estate funds in a joint account until distribution, then pay equal shares to each. All transactions are recorded against both ledgers.
Three siblings resolve a dispute about their late parents' property. The settlement is £150,000 to be shared equally. They are all your clients for this matter. You receive the settlement into a joint account and pay £50,000 to each sibling, with each payment recorded against their ledger.
A client's own account is a bank account in the client's name that the client controls directly. You are not responsible for operating this account - it belongs to the client and they manage it. Your role is limited, and this arrangement only applies in specific circumstances with proper safeguards.
This arrangement is typically used for large commercial clients or corporate clients who have their own sophisticated accounting systems. They hold client money themselves rather than you holding it. This is only permitted with a written agreement and appropriate safeguards in place.
You must have a written agreement with the client setting out the arrangements for their own account. This should specify that the client will hold money directly, what your limited role will be, and what records you both need to keep. The SRA requires this agreement to protect clients and ensure proper accounting.
When a client holds their own account, your role is limited. You don't operate the account or control the funds. You might provide advice on how client money should be handled, but the client is responsible for actual accounting and compliance. This reduced responsibility comes with reduced control - you can't protect funds you don't hold.
Client's own account arrangements are not appropriate for most private clients. They are designed for sophisticated commercial clients with proper accounting systems. Don't use this arrangement just to avoid administrative work.
A third-party managed account is an account that holds client money but is operated by someone other than you - perhaps another solicitor, an accountant, a trustee company, or a financial institution. The money is still client money, but you don't have direct control over it.
Common third parties include other solicitors handling matters on your behalf, trustee companies managing trusts, accountants acting as trustees, or banks holding funds in escrow. Each of these might hold client money that relates to your matter, without you operating the account.
Even though you don't operate a third-party account, you still have responsibilities. You need to know where client money is held, satisfy yourself that the third party is reliable, and ensure your client is informed about the arrangement. You can't abdicate responsibility just because someone else is holding the funds.
Before allowing a third party to hold client money, do your due diligence. Are they regulated? Do they have appropriate safeguards? What happens if something goes wrong? You need to be comfortable that the arrangement protects your client's interests.
Money held by a third party on behalf of your client is still client money. The fact that someone else operates the account doesn't change its nature - it still belongs to the client and must be protected accordingly.
You must know where your clients' money is held. If a third party is holding client money on your client's behalf, you need to track this. You can't simply ignore it because it's not in your client account - it's still client money and you're still responsible for ensuring it's protected.
You need to be satisfied that the third party holding the money complies with appropriate rules. If it's another solicitor, they'll be bound by the SRA Accounts Rules. If it's someone else, check what regulations apply and whether they offer equivalent protection to your client.
Your client must be told about third-party arrangements. They should know who is holding their money, where it's held, and what protections apply. Don't assume this is obvious - make sure your client understands and agrees to the arrangement.
You can't set up a third-party arrangement and forget about it. Monitor the arrangement, check that the third party is complying with requirements, and review regularly. If something changes, you may need to make alternative arrangements.
When money is received by a third party on behalf of your client, you need to record this in your client ledger even though it hasn't passed through your client account. The ledger entry shows that the third party is holding funds for your client and acts as your record of the transaction.
When the third party makes a payment from funds held for your client, record this in your client ledger. You're tracking what's happening to your client's money even though you didn't make the payment yourself. This is crucial for maintaining accurate records.
You should reconcile your client ledgers with statements from the third party holding the funds. This confirms that your records match what the third party actually holds. Any discrepancies need investigation - you can't simply assume the third party's records are correct.
| Feature | Standard Client Account | Joint Client Account |
|---|---|---|
| Parties | Single client | Multiple clients (all must be your clients) |
| Ledgers | One client ledger | Separate ledger for each party |
| Withdrawals | Client can instruct | Must follow joint authority |
| Documentation | Standard retainer | Additional joint authority required |
| Type | Who Operates | Your Level of Control | When Used |
|---|---|---|---|
| Standard client account | You (your firm) | Full control | Most client money situations |
| Joint client account | You (your firm) | Full control | Multiple clients with shared interest |
| Client's own account | Client directly | No control | Large commercial clients only |
| Third-party managed | Third party | No direct control | When another firm handles the matter |
For joint accounts and third-party arrangements, written documentation is essential. It protects you from disputes and shows you complied with the SRA Rules. Never rely on verbal understandings when multiple parties or third parties are involved.