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Steps to protect clients' funds in property deals

Friday 11 March 2011

Safeguards will make it difficult for lawyers to flee with the funds

A STRING of safeguards has been proposed in Parliament to make it harder for conveyancing lawyers to make off with their clients' funds.

If the safeguards are approved, lawyers will no longer be allowed to receive and hold conveyancing money, belonging to buyers and sellers of property, in their normal client accounts. They will instead have to open a new conveyancing account with an approved bank.

The withdrawal of money from the accounts, regardless of the sum, will also generally require signatures from two parties - usually lawyers for the buyer and seller. If the buyers or sellers still do not wish to deposit the funds with the lawyers, they can engage the Singapore Academy of Law (SAL) to hold the conveyancing money on their behalf.

These were among proposed changes to the Conveyancing Act introduced yesterday by Law Minister K. Shanmugam. It is targeted to be implemented in the third quarter of this year. The law currently does not bar lawyers from holding clients' conveyancing money.

The most recent measure to strengthen safeguards was in 2007. It required two signatories for withdrawing amounts of more than $30,000 from the clients' accounts. Even then, lawyers from the same firm could sign for each other, while sole proprietors could partner up to sign each other's requests.

The latest proposals aim to address the problem of rogue lawyers who flee with their clients' money. In the last six years, there has been at least four such cases.

In an infamous 2006 case, lawyer David Rasif, a sole proprietor, made off with about $11 million entrusted to him by an American couple for the purchase of a bungalow off Holland Road. He is still at large.

To support the proposed measures, the SAL will also launch an electronic system that will allow lawyers to initiate payouts from the conveyancing accounts, and for the other party to countersign digitally. This will save time by dispensing with the need for hard-copy signatures. It also allows banks to securely retrieve and process instructions.

The lawyer countersigning a request for a payout will have the duty of requesting information and verifying payment details. To resolve possible countersigning disputes, the aggrieved party can apply to the Law Society, which will appoint an adjudicator from a panel of senior lawyers.

The proposed changes tabled yesterday came after two rounds of public consultation and two pilot trials. In all, more than 150 law firms participated and almost 700 cases were tested.

In the first round of consultations in 2009, the Law Ministry suggested that lawyers should no longer be able to deposit conveyancing money into their regular clients' accounts and that the SAL be the main entity to hold it. But after feedback, tweaks were made to allow clients the option to leave the money with their lawyers in a special conveyancing account, or with the SAL.

Lawyer Rajan Chettiar, a sole proprietor, said the new rules will mean more administrative work, especially for small firms. 'But I'm for it because it'll restore public confidence in lawyers and safeguard clients from black sheep in the profession,' he said.

Source: The Straits Times