The transaction completed months ago. The file is marked closed, the fee earner has moved teams and a balance remains on the client ledger.
Who can explain why the money is still there?
The CLC’s Risk Agenda 2026 identifies aged balances and client money controls as areas requiring attention. For conveyancing firms, the practical question is whether every remaining balance has an identifiable owner, a proper purpose and someone responsible for its resolution.
Distinguish a genuine retention from an unexplained balance
A contractual retention may have a continuing purpose. An unused allowance for a disbursement that has already been settled may require different action.
A ledger description such as “retention” should be supported by the relevant agreement and a clear explanation of the release conditions.
For each amount retained, the responsible person should be able to identify:
- Whose money it is.
- The reason it remains with the firm.
- The document or instruction supporting that position.
- The event or evidence required before payment can be made.
- The next review date and person responsible.
If these questions cannot be answered, the balance needs investigation.
Do not wait for money to become “old”
An ageing report helps identify outstanding items, but age alone does not determine whether money should remain in client account.
For SRA-regulated firms, rule 2.5 of the SRA Accounts Rules requires client money to be returned promptly once there is no longer a proper reason to hold it.
A firm’s internal review interval does not extend that obligation. CLC-regulated practices must apply their own Accounts Code and associated requirements.
Give every outstanding balance an owner
Accounts staff may identify the balance, but the reason for retaining it may depend on the transaction documents and legal work.
A useful procedure connects the accounts team with the supervising lawyer. It should also provide cover when the original fee earner is absent or has left the practice.
Our guide to putting a CQS Risk Management Policy into practice explains why allocation of responsibility and escalation need to form part of everyday work.
Review service-charge retentions against their actual terms
Where money is held pending final service-charge accounts, check the contractual arrangement, the information outstanding and the agreed release process.
Do not assume that a statutory deadline and a contractual retention period perform the same function. Our article on service charges and the 18-month rule provides related background.
Keep the appropriate parties informed and record the action needed to resolve the retention.
Return funds through a controlled process
Pressure to clear balances should not weaken payment verification. Check entitlement, authority and payment details using the firm’s approved procedures.
If the rightful recipient cannot be identified or traced, follow the applicable regulatory process. Do not assume that the conditions for disposal are identical under the SRA and CLC regimes.
Check whether the procedure works on real files
Select a sample of closed matters with remaining balances. Can a reviewer understand why the money is held, what action has been taken and when the issue will next be reviewed?
Use the findings to correct individual files and improve the process that allowed unexplained balances to remain.
Test how your CQS procedures operate in practice
Lexsure’s Independent CQS Compliance Audit examines policy implementation through document review, file checks and staff discussions, with a prioritised action plan.
Enquire about an Independent CQS Compliance Audit
Discuss the scope required for your practice. A CQS review does not replace an accountant’s report or a specialist review of compliance with the applicable Accounts Rules.