Solicitors’ Accounts Rules (SAR) - dealing with leftover balances

According to Rule 15(3) client money must be returned to the client promptly following the completion of a matter. Various situations can arise in connection with residual sums and we are often asked how to deal with them so here is some guidance.

Properly retain the money
Rule 15(4) applies to situations where the solicitor is properly entitled to retain a sum of money following completion of work; for example, where a third party disbursement has still to be discharged. In this case, the solicitor is required to inform the client, promptly and in writing, of the sum being retained and the reason for its retention. In addition, the solicitor must write to the client at least annually thereafter for as long as the money continues to be held.

Send the client a cheque
This is probably the simplest way to deal with residual balances of £50 or less. We are aware that for very small sums of money, some clients refuse to bank the cheque. Where this happens, it is worth reading Rule 22(2A) which talks about making ‘adequate attempts’ to return the money. The term is not defined but the solicitor may conclude that sending a cheque and following up with a telephone call constitutes an adequate attempt, particularly if the cost of cancelling the cheque is more than the value of the sum you are seeking to return. In such cases there is probably no need to do anything further.

Donate the money to charity
Following guidance set out in Rule 22(2A) the solicitor can, on behalf of the client, pay the money to charity. It is first necessary to agree this arrangement with the client and we would suggest obtaining written confirmation. At the very least, the solicitor should make a note of any discussion and follow up in writing setting out precisely what has been agreed.

Apply to the SRA to withdraw the sum
Where the client cannot be traced and the sum in question is in excess of £50, the solicitor can apply for authorisation from the SRA to withdraw the sum and pay it to a charity which will then provide an indemnity against any subsequent claims. The SRA website has a link to a form which the solicitor can complete detailing the sum involved, its age and what efforts have been made to trace the client (www.sra.org.uk/documents/rules/sar/rule-22-1-h-application-information-form.pdf). In some circumstances the SRA may require a letter from the solicitor’s accountants in order to confirm elements of the application.