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Client care information

5 September 2016
Please note: Since 1 October 2015, solicitors have been required to include information about an approved alternative dispute resolution (ADR) entity in final letters to complainants following a first-tier complaint.
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Legal status

This practice note is the Law Society's view of good practice in this area. It is not legal advice.

Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.

Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.

For queries or comments on this practice note contact the Law Society's Practice Advice Service.

Professional conduct

The following sections of the SRA Code are relevant to the information that has to be provided in writing to the client at the outset of the retainer:

Chapter 1 on Client Care

Chapter 9 on fee sharing and referrals

SRA Principles

There are 10 mandatory principles which apply to all those the SRA regulates and to all aspects of practice. The principles can be found in the SRA Handbook.

The principles apply to solicitors or managers of authorised bodies who are practising from an office outside the UK. They also apply if you are a lawyer-controlled body practising from an office outside the UK.

Terminology

Must - A specific requirement in legislation or of a principle, rule, outcome or other mandatory provision in the SRA Handbook. You must comply, unless there are specific exemptions or defences provided for in relevant legislation or the SRA Handbook.

Should

  • Outside of a regulatory context, good practice for most situations in the Law Society's view.
  • In the case of the SRA Handbook, an indicative behaviour or other non-mandatory provision (such as may be set out in notes or guidance).

These may not be the only means of complying with legislative or regulatory requirements and there may be situations where the suggested route is not the best possible route to meet the needs of your client. However, if you do not follow the suggested route, you should be able to justify to oversight bodies why the alternative approach you have taken is appropriate, either for your practice, or in the particular retainer.

May - A non-exhaustive list of options for meeting your obligations or running your practice. Which option you choose is determined by the profile of the individual practice, client or retainer. You may be required to justify why this was an appropriate option to oversight bodies.

SRA Code - SRA Code of Conduct 2011

2007 Code - Solicitors' Code of Conduct 2007

OFR - Outcomes-focused regulation

SRA - Solicitors Regulation Authority

IB - indicative behaviour

FCA - Financial Conduct Authority

A glossary of other terms used throughout this practice note is available on the SRA website.

The Law Society also provides a full glossary of other terms used throughout this practice note

1 Introduction

1.1 Who should read this practice note?

This practice note is relevant to all solicitors who are involved in client care.

1.2 What is the issue?

The Solicitors Regulation Authority (SRA) Handbook sets out all the SRA's regulatory requirements on solicitors and their practices, and is updated at regular intervals. It outlines the ethical standards that the SRA expects of practices and practitioners and the outcomes that the SRA expects them to achieve for their clients.

2 Treating clients fairly

The first outcome in chapter 1 of the SRA Code relates to client care and requires you to treat clients fairly. This outcome should always be kept in mind when considering what information you provide to your client, both at the start of a retainer and throughout their matter.

Many clients are not regular users of legal services provided by solicitors. In addition, a solicitor is often instructed while the client is experiencing a stressful situation. The primary issue for the client is a successful resolution of their legal problem or completion of their transaction. Specific details around costs and what services you will provide to them can often be considered as secondary by the client until a problem arises.

To help focus the client on the exact parameters of a retainer, solicitors often provide an initial letter to the client, called a client care letter, along with any terms of business. While there is no requirement to provide such a letter, clients may find it helpful to have some information written down so that they can refer to it at a later date. This written information may also be used as evidence against complaints of insufficient information or inadequate professional service. However, if the information is unclear or important details are not highlighted to the client then their value will be limited. There is a small amount of information that must be provided in writing, but you must also consider whether you should provide other relevant information in writing in order to achieve the outcomes set out in the SRA Code and to comply with the SRA Principles.

It is important that clients can understand the information they are provided with, and that important information is highlighted to them and explained clearly. You should consider your client's needs and circumstances when you decide what information to provide them and the manner in which it is provided. In particular, you should consider whether your client is vulnerable or has any special needs.

Outcome 1.12 requires that clients must be in a position to make informed decisions about:

  • the services they need
  • how their matter will be handled, and
  • the options available to them

While much of the information given in the initial interview will help clients come to an informed decision, the written information given at the start of a retainer, whether in a client care letter or some other format, will also be important in demonstrating that you have met this outcome.
 

3 Regulatory requirements and guidance

There is a limited amount of information that you must provide to your client in writing at the start of a retainer under the SRA Code. The SRA also suggests, in the IBs, that there is other information you should provide to clients. This does not have to be in writing but it may be helpful, for both you and your client, to do so.

There is also additional information that you must supply clients with under:

  • the Provision of Services Regulations 2009. This information can be provided by a variety of means including via a client care letter. See our practice note for more detail and
  • the EU Directive on Alternative Dispute Resolution. See our advice page for more detail.
     

3.1 What you must tell your client in writing

There are relatively few outcomes that require you to provide information in writing. These relate to complaints.

You must inform clients, in writing at the outset of their matter, of their right to make a complaint and details of how to do so (outcome 1.9). You must also inform them, in writing at the time of engagement and at the conclusion of your complaints procedure, of their right to complain to the Legal Ombudsman, the time frame for doing so and full details of how to contact the Legal Ombudsman (outcome 1.10).

Some clients will not have the right to complain to the Legal Ombudsman, eg businesses, charities and/or clubs with a turnover of more than £1m .These clients will still need to be informed of their right to complain to you and their right to assessment. However, you may wish to highlight to them the limitations of the Legal Ombudsman scheme.

Full details regarding the remit of the Legal Ombudsman can be found on the Legal Ombudsman's website.

As outcomes 1.9 and 1.10 require you to inform your clients of this information at the start of an engagement, you may need to provide this information to repeat clients on numerous occasions. For this reason, you may wish to create a short letter or leaflet containing the essential information for repeat clients. Many solicitors choose to include this information in a client care letter. The Legal Ombudsman has provided some suggested wording.

Clients must also be made aware of their right to challenge, or complain about, their bill (outcome 1.14). This includes informing clients of their right to apply for assessment of the bill under Part III of the Solicitors Act 1974. Clients must also be made aware of the circumstances when they may be liable to pay interest on an unpaid bill.

It is important to note that if the Legal Ombudsman does not consider a solicitor to have provided sufficient information on complaints handling process, it may charge a case fee to the solicitor, even if no evidence of poor service has been found. It is therefore in solicitors' best interests to ensure that they provide clear and up to date client care information.

3.2 What you must tell your client

There are several outcomes that require you to advise clients of information. These requirements are summarised below. You do not have to provide this information in writing but if you chose not to you will need to consider how you will demonstrate that you have met the outcomes.

3.2.1 Regulatory status

You must inform clients whether, and how, the services you provide are regulated and how this affects the protections available to them (outcome 1.7). For most solicitors' firms, all the services they provide will be regulated by the SRA. However, within multidisciplinary practices the legal services provided may be regulated, while the non-legal services may not be regulated or may be regulated by another regulator. It is important clients are made aware which services are regulated and any differences there might be in the regulatory protections available.

3.2.2 Cost information and fee arrangements

Clients must be given the best possible information about the cost of their matter, both at the start of the retainer and throughout (outcome 1.13).

There are specific requirements on the information you must provide where there is a referral arrangement or fee sharing arrangement (outcome 1.6). You should explain any arrangements that are relevant to your client's instructions to allow clients to make an informed choice about how to pursue their matter. The information should be clear and in writing or in a form appropriate to the client's needs. Clients must be informed of any financial or other interest that an introducer has in referring the client to you.

3.2.3 Separate businesses

Solicitors and solicitors' practices are able to own or manage separate unregulated businesses providing non-reserved legal and other professional services to the public (although they are not able to provide legal services through those separate businesses).

The SRA does not regulate separate businesses, but it does regulate authorised persons that have connections with them. If you or your firm owns or manages a separate unregulated business to which clients may be referred or introduced, you should be mindful of the following outcomes in Chapter 12 of the SRA Code:

Outcome (12.1) you ensure, and have safeguards in place to ensure, that clients are clear about the extent to which the services that you and the separate business offer are regulated.

Outcome (12.2) you do not represent, directly or indirectly, the separate business as being regulated by the SRA or any of its services as being regulated by the SRA.

Outcome (12.4) you only: (a) refer, recommend or introduce a client to the separate business (b) put your client and the separate business in touch with each other; or (c) divide, or allow to be divided, a client's matter between you and the separate business, where the client has given informed consent.

Informed consent should include the client being made aware of the respective regulatory position of the two firms, and the differences in safeguards available, including legal professional privilege and rights of redress (including access to the compensation fund and recourse to the Legal Ombudsman). Clients should also be informed of the nature of the firm's connection with the separate business.

It is also fundamental that any referral to a separate business or division of a matter should also only occur if it is in the client's best interests in accordance with Principle 4 of the SRA Principles 2011. Please refer to the SRA guidance on the separate business rule for further information.

3.2.4 Other requirements

There are also specific client care requirements in relation to the:

3.3 What you should tell your client

The SRA has provided numerous IBs to help solicitors comply with the outcomes in chapter 1 of the SRA Code on client care. Many of these relate to information for the client. Below is a brief summary of the IBs.

3.3.1 Service levels

You should agree service levels with your client, for example, the type and frequency of communications (IB 1.1). The Law Society has provided an example of the types of service standards you may wish to agree to:

  • We will update you [by telephone or in writing] with progress on your matter [regularly, fortnightly, monthly, following agreed events]. 
  • We will communicate with you in plain language. 
  • We will explain to you [by telephone or in writing] the legal work required as your matter progresses. 
  • We will update you on the cost of your matter [monthly, three monthly, six monthly, at agreed events]. 
  • We will update you on whether the likely outcomes still justify the likely costs and risks associated with your matter whenever there is a material change in circumstances. 
  • We will update you on the likely timescales for each stage of this matter and any important changes in those estimates. 
  • We will continue to review whether there are alternative methods by which your matter can be funded. 

Both you and your client will have responsibilities and these should be explained to the client (IB 1.2). The Law Society has provided an example of what you might agree:

Your responsibilities may include:

  • We will review your matter regularly.
  • We will advise you of any changes in the law relevant to your matter.
  • We will advise you of any circumstances and risks of which we are aware or consider to be reasonably foreseeable that could affect the outcome of your matter.

The client's responsibilities may include:

  • You will provide us with clear, timely and accurate instructions.
  • You will provide all documentation required to complete the transaction in a timely manner.
  • You will safeguard any documents that are likely to be required for disclosure.

3.3.2 Contact details

You should inform the client, in writing, of the name and status of the person dealing with their matter and the name and status of the person responsible for the overall supervision of the matter (IB 1.3).

3.3.3 Fees

All information on fees should be clear, easily accessible, and in a form that is appropriate to the client's needs and circumstances. You should explain your fees and if and when they are likely to change (IB 1.14).You should discuss with the client how they will pay and explain the consequences of being publicly funded in relation to costs (IB 1.16).

The Law Society has provided examples of information you may wish to include:

  • the basis for the fixed fee or the relevant hourly rates and an estimate of the time to be charged
  • whether rates may be increased during the period of the retainer
  • expected disbursements and likely timeframes for these being due
  • potential liability for others' costs, where relevant
  • VAT liability

You should discuss with the client whether the potential outcome of the client's case is likely to justify the risk involved, particularly the risk of paying the costs incurred by someone else's fees (IB 1.13). You should also bring to the client's attention the potential liabilities, including other payments, the client may face (IB 1.15).

If you are acting under a conditional fee arrangement, or other fee arrangement governed by statute, you should provide the client with all the relevant information relating to that arrangement (IB 1.17).

3.3.4 Client protection

Clients should be made aware and informed in writing if you propose to limit your liability to your client to a level above the minimum prescribed by the SRA Indemnity Insurance Rules (IB 1.8).

Clients should also be informed if they are not entitled to the protections offered by the SRA compensation fund, for instance where non-legal services provided by the firm are unregulated by the SRA (IB 1.11).

4 Law Society Good Practice

This section provides advice on the presentation of a client care letter and terms of business and the additional information you may wish to provide in these documents. This advice is based on what the Law Society considers to be good practice.

4.1 Communication

The SRA Code does not require you to provide large amounts of information to clients in writing. However, you must inform clients of certain matters and continue to update clients. Good communication is needed to meet these outcomes. The advice below provides examples of what the Law Society considers to be good practice when communicating in writing.

4.1.1 Principles of effective communication

To communicate well, you should:

  • Make sure the information you need to communicate is presented in a clear and straightforward manner, so that clients are in a position to make informed decisions. Complicated forms and overly legalistic language may act as a barrier to understanding.
  • Be alert to communication challenges that clients face, such as hearing difficulties, disability, learning difficulties, language barriers or other cross-cultural issues, and look at ways to overcome those challenges.
  • Consider your client demographic when deciding how to present information. For example, you may provide information in a language other than English, if you have a large client base from a particular ethnic group for whom English is a second language.

As people understand information differently, you may explain to your client the importance of the client care information you provide and the terms of business and highlight any key information. You should also provide the opportunity to explain any parts of the documents that they do not understand or have questions about.

4.1.2 Length and style

Many clients comment about being given large documents containing lots of legal language in small print by their solicitors. Often these documents are not read or understood.

You may wish to consider adopting the following style for your written client information to help clients understand the contents:

  • ensure the key information is highlighted early on. If the document exceeds three pages, you may wish to move detailed information into annexes. This will help ensure important information is not overlooked
  • use a clear font, in no smaller than 11 point
  • make use of headings and bullet points to break up blocks of text and highlight points
  • use plain language
  • only include terms and conditions which actually apply to the specific retainer
  • where a document is long, include a table of contents

These guidelines are generic and it will be important to consider the needs of your clients when drafting information. For example, a larger font may be appropriate if a client has poor eyesight.

4.2 Terms of business

There is no regulatory requirement to set out terms of business. However, it is good business practice to do so.

Terms of business will normally set out details of:

While not a regulatory requirement, you may wish to get your client to sign and date a copy of the terms of business. Under rule 48.8 of the Civil Procedure Rules, if the client has not agreed your terms of business in a contentious matter in the County Court, you will be unable to claim any more costs from the client than the client is entitled to recover from the other side.

4.2.1 Information on professional indemnity insurance (PII)

Under the EU Provision of Services Directive, you must provide clients with the contact details of your PII provider and the territorial coverage of that insurance. This information can be provided in the client care letter, via the firm's website, or made easily accessible at the firm's place of business. For more information see our practice note on the directive.

The issue of client confidentiality arises when informing an insurer about a claim. Client confidentiality and legal privilege can only be waived with the express consent of the client. As a precaution, in order to expedite a notification of circumstance/claim in the event of being scammed, consider adding to your terms of engagement wording to the effect that if the firm has to make a notification under the terms of its professional indemnity policy, information about the client and your file may be seen by your insurers. Your files may, therefore, be seen by an assessor or another person unconnected with the firm in the future, unless the client has notified you that it does not agree to this.
 

4.2.2 Data protection issues

You should include in your terms of business reference to how you comply with the Data Protection Act 1998 with respect to information held on your client.

For example:

We use the information you provide primarily for the provision of legal services to you and for related purposes including:

  • updating and enhancing client records
  • analysis to help us manage our practice
  • statutory returns
  • legal and regulatory compliance

Our use of that information is subject to your instructions, the Data Protection Act 1998 and our duty of confidentiality. Please note that our work for you may require us to give information to third parties such as expert witnesses and other professional advisers. You have a right of access under data protection legislation to the personal data that we hold about you.

We may from time to time send you information that we think might be of interest to you. If you do not wish to receive that information please notify our office in writing.

Read our practice note on data protection.

4.2.3 Details on storage of documents and any related costs

You should advise the client how long you will retain their file and outline what will happen to the file after that time.

You should advise the client of costs related to all of the following:

  • storage
  • retrieval
  • additional copies

If you intend to only store documents in an electronic format, you should consider whether the absence of paper documents will be detrimental to the client's interests before you agree to such storage methods with your client.

You should also consider any file retention requirements of your indemnity insurers when assessing the appropriate length of time to retain client files.

For further information on storage of files, particularly in relation to wills and probate files, see our file retention practice note.

For further information on retention of client due diligence files, see paragraph 3.8 of our anti-money laundering practice note.

For example:

After completing the work, we will be entitled to keep all your papers and documents while there is still money owed to us for fees and expenses.

We will keep our file of your papers for up to [x] years, except those papers that you ask to be returned to you. We keep files on the understanding that we can destroy them [x] years after the date of the final bill. We will not destroy documents you ask us to deposit in safe custody.

If we take papers or documents out of storage in relation to continuing or new instructions to act for you, we will not normally charge for such retrieval.

However we may charge you for:

  • time spent producing stored papers that are requested, and
  • reading, correspondence or other work necessary to comply with your instructions in relation to the retrieved papers

4.2.4 Confidentiality and disclosure

You are required to have effective systems and controls in place to enable you to identify risks to client confidentiality and to mitigate those risks (IB 4.1). Information for clients should explicitly set out the circumstances of when and to whom information will be made available, why they would need to access information, and why disclosure might be necessary. The SRA's guidance on protecting and maintaining client confidentiality states that consent to disclosure must be informed consent, and consent must not be assumed. Clients should be given an opportunity to object to disclosure.

In addition to the need to consider this issue generally, there are three specific areas where issues of confidentiality and disclosure could arise:

4.2.4.1 Outsourcing of work

Where you outsource work on client files, there is a risk your outsourced provider may breach client confidentiality.

Drawing attention to this risk may mitigate any breach of confidentiality that occurs, but you still risk regulatory action. You should ensure that you have a confidentiality agreement with your suppliers.

In your terms and conditions you should:

  • advise the client if the practice outsources work and the type of work it outsources
  • alert the client to the potential risks in relation to preserving client confidentiality
  • ask the client to tell you if they object to this practice

For example:

Sometimes we ask other companies or people to do [typing/photocopying/other work] on our files to ensure this is done promptly. We will always seek a confidentiality agreement with these outsourced providers. If you do not want your file to be outsourced, please tell us as soon as possible.

There are additional requirements relating to the outsourcing of work set out in Chapter 7 of the SRA Code. See our outsourcing practice note.

4.2.4.2 Auditing and vetting of files

If your firm participates in quality schemes such as Investors in People, Lexcel and other quality audits, you should advise your client if your files are required to be produced to assessors or others as part of an audit or quality check.

For example:

External firms or organisations may conduct audit or quality checks on our practice from time to time. They may wish to audit/quality check your file and related papers for this purpose. It is a specific requirement imposed by us that these external firms or organisations fully maintain confidentiality in relation to any files and papers which are audited/quality checked by them. Your files may also be reviewed in a due diligence exercise relating to the sale or transfer of all or part of our business, the acquisition of another business by us or the acquisition of new business If you do not wish your file to be used in this way, please let us know as soon as possible.

4.2.4.3 Cloud computing

Cloud storage can pose particular difficulties in relation to confidentiality. In addition to a thorough risk assessment, in the event that you use cloud storage for client files and other confidential information, you should state this along with the details in your terms and conditions and ask clients to object if they do not want their files and/or other information to be stored in this way.

4.2.5 Any clauses limiting liability

The SRA Code allows you to limit your practice's liability provided that this is not below the minimum level of cover required by the Indemnity Insurance Rules (outcome 1.8). The related IB suggests you ensure that you advise the client of any limitation of liability in writing and specifically draw their attention to it.

Where your practice is a limited liability partnership (LLP) you should also explain any limitation on personal liability for the members, directors and employees of the practice.

For example:

Our liability to you for a breach of your instructions shall be limited to £X, unless we expressly state a higher amount in the letter accompanying these terms of business. We will not be liable for any consequential, special, indirect or exemplary damages, costs or losses, or any damages, costs or losses attributable to lost profits or opportunities.

We can only limit our liability to the extent the law allows. In particular, we cannot limit our liability for death or personal injury caused by our negligence.

Please ask if you would like us to explain any of the terms above.
 

4.2.6 Processes for terminating the retainer

You should clearly state how a client can terminate your retainer and the consequences of their doing so. You should also outline the circumstances under which you can terminate the retainer. You should only cease to act for a client with good reason and with provision of reasonable notice. If the retainer is terminated without good reason then a solicitor may not be able to require the client to pay for work done up to this point.

This may be an appropriate place to mention your right to a lien for unpaid costs.

For example:

You may end your instructions to us in writing at any time, but we can keep all your papers and documents while there is still money owed to us for fees and expenses.

We may decide to stop acting for you only with good reason. We must give you reasonable notice that we will stop acting for you.

If you or we decide that we should stop acting for you, you will pay our charges up until that point. These are calculated on [an hourly basis plus expenses/by proportion of the agreed fee] as set out in these terms and conditions.

4.2.7 Money laundering and terrorist financing

Your anti-money laundering obligations depend on whether you are providing clients with services which are regulated by the Money Laundering Regulations 2007. If this is the case, you must conduct client due diligence and monitor your client's retainer for warning signs of money laundering or terrorist financing.

Even if you are not providing a client with regulated services, you must still monitor your client's retainer for warning signs of money laundering or terrorist financing.

If you provide both regulated and non-regulated services, you may wish to apply the higher level of obligations to all clients. However, you should consider the cost implications.

For advice on whether you are providing services within the regulated sector and other anti-money laundering requirements, see our anti-money laundering practice note. The practice note also contains further advice on your counter terrorist financing obligations.

4.2.7.1 Client due diligence (CDD)

For more information on how to conduct CDD, see chapter 4 of our anti-money laundering practice note.

While you may have already obtained CDD material before sending out the client care letter, you should still include information in the terms and conditions about your CDD obligations.

You should cover all of the following points in your terms and conditions:

The Money Laundering Regulations 2007 require you to:

  • Identify the client and verify their identity on the basis of documents, data or information obtained from a reliable and independent source.
  • Identify, where there is a beneficial owner who is not the client, the beneficial owner and take adequate measures, on a risk-sensitive basis, to verify his identity so that you are satisfied that you know who the beneficial owner is. This includes understanding the ownership and control structure of a legal person, trust or similar arrangement.
  • Obtain information on the purpose and intended nature of the business relationship.
  • Continue to monitor the transaction and keep identity information up to date

You may verify a client's identity in a number of ways. You should state your practice's preferred method of verification, eg passport.

If the client has difficulty providing the information you request, you should ask them to contact you to discuss other ways to verify their identity.

For example:

The Money Laundering Regulations require solicitors to obtain satisfactory evidence of the identity of their clients and ,where there is a beneficial owner who is not the client, the beneficial owner. This is because solicitors who deal with money and property on behalf of their client can be targeted by criminals attempting to launder money.

To comply with the law, we need to obtain evidence of your identity as soon as possible. Our practice is to [insert your standard practice]. If you cannot provide us with the specific identification requested, please contact us as soon as possible to discuss other ways to verify your identity.

The anti-money laundering guidance which UK banks and other financial services firms must adhere to is issued by the Joint Money Laundering Steering Group (JMLSG) The JMLSG considers all clients with funds deposited in a law firm's pooled client account to be beneficial owners of that account. The JMLSG does not require banks to routinely identify the beneficial owners of law firms' pooled client accounts, as they do with most other accounts they issue. Pooled client accounts are granted this exemption on the proviso that this information is available on request. Accordingly, you may wish to make the client aware of this in your terms of business and obtain their consent for disclosure of this information to your bank.

4.2.7.2 Making a disclosure

If you suspect a client is engaged in money laundering or terrorist financing, you may risk committing a principal money laundering or terrorism offence, or an offence of failing to disclose your suspicions to relevant authorities.

For further information on your legal options in these circumstances, see chapter 5 of our anti-money laundering practice note.

Making a disclosure may require you to either temporarily cease work on the client's retainer or to withdraw completely. It is not tipping-off to include a paragraph about your obligations under the money laundering legislation in your terms of business.

For example:

We are professionally and legally obliged to keep your affairs confidential. However, solicitors may be required by statute to make a disclosure to the National Crime Agency where they know or suspect that a transaction may involve money laundering or terrorist financing. If we make a disclosure in relation to your matter, we may not be able to tell you that a disclosure has been made. We may have to stop working on your matter for a period of time and may not be able to tell you why.

4.2.8 Mortgage fraud

Where you are acting for both the lender and the purchaser you should highlight the lender's requirements that you fully disclose to them relevant facts affecting their decision to make the loan. If you specifically draw this term to your client's attention and have them sign their acceptance of this term, then you may rely on this as consent from the client to make the disclosures to the lender.

We are also acting for your proposed lender [Name of bank/building society] in this transaction. We have a duty to fully reveal to your lender all relevant facts about the purchase and mortgage. This includes:

  • any differences between your mortgage application and information we receive during the transaction
  • any cash back payments or discount schemes that a seller is giving you
     

4.2.9 Avoiding scams

Firms holding client money are a target for scammers. Compliance with Chapter 7 of the SRA Code of Conduct requires your firm to monitor the risks to money and assets entrusted to you by clients and take steps to address issues identified (outcomes 7.3 and 7.4). You should ensure that everyone in your firm keeps their knowledge of the techniques used by criminals and your firm's risk management policy up to date, to prevent criminals accessing client account details.

The Law Society provides updated information and advice on scams prevention, including a list of common sense measures that firms can take to protect themselves against scams.

For example, you may wish to:

  • Advise your clients in your terms of engagement of the risks and their own responsibilities for their own data and bank account details and the dangers of social engineering scams and IT manipulation to steal data.
  • Ensure you provide your client account banking details to clients in a secure manner at the outset of a transaction. Consider providing client account details at a face-to-face meeting with the client or by letter which is not sent by email. Make clear to clients that your firm will not be changing its bank account details during the course of the transaction.
  • Consider including a phrase at the end of the email signature block of all members of staff along the lines of:

    Please be aware that we do not notify changes to important business information, such as bank account details, by email.
     
020 7320 5675
020 7320 5675

4.2.10 Financial arrangements with clients

4.2.10.1 Transfer of funds

You should tell clients how you will receive funds from them and make payments to them. This is due to the strict requirements for client accounts, and the risk that clients may try to use your client account to launder money. Large cash payments may also be a sign of money laundering and accepting them can also be a security risk. You should establish a policy of not accepting cash payments above a certain limit either at your office or into your bank account.

For example:

Our practice's policy is [not to accept cash from clients/to only accept cash up to £X].

If you try to avoid this policy by depositing cash directly with our bank, we may decide to charge you for any additional checks we decide are necessary to prove the source of the funds.

Where we have to pay money to you, it will be paid by cheque or bank transfer. It will not be paid in cash or to a third party.

For more information see our practice note on anti-money laundering.

4.2.10.2 Payments of interest on money held in client accounts

The Accounts Rules provide that you must account to the client for any interest earned on client monies, when it is fair and reasonable to do so in all the circumstances. You must have a written policy on the payment of interest, which seeks to provide a fair outcome. The terms of the policy must be drawn to the attention of the client at the outset of a retainer (Accounts Rule 22.3) eg, by including a paragraph in your terms of business, unless it is inappropriate to do so in the circumstances. For example, this may be unnecessary if you have acted for the client previously. The guidance notes to the Accounts Rules in the SRA Handbook provide further information in his respect.

4.2.10.3 Financial services

The Law Society is a designated professional body under Part XX of FSMA, and firms may therefore carry on certain regulated activities without being regulated by the Financial Conduct Authority (FCA), if they can meet the conditions specified in section 327 of FSMA. As a designated professional body, the Law Society is required to make rules governing the carrying on by firms of regulated activities. You must include a disclosure in your terms and conditions that clearly states your regulatory status. The Financial Services (Conduct of Business) Rules 2001 set out the information you are required to disclose. If your practice is authorised by the FCA you must comply with the requirements of the FCA as to status disclosure statements in your terms of business. If you provide an insurance mediation activity with or for a client, you must comply with the requirements set out at Annex 1: Insurance Mediation Activities of the Financial Services (Conduct of Business) Rules.

4.2.12 Consumer contract regulations 2013

The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 require you to provide specific information to clients depending upon where the contract is effected. This includes information on the right to cancel where a contract is made 'off premises' or 'at a distance'. Further information and a 'model right to cancel' clause can be found in the Consumer Contracts Regulations 2013 practice note.
 

4.3 Other information you may wish to give your client

There is other information, outside of your terms of business, that you may wish to provide to your client.

4.3.1 Fees

Failure to provide adequate costs information is one of the areas most likely to cause complaints. You should explain your fees clearly and in a manner the client can understand both at the outset and as the matter progresses. It is not always possible to agree a fixed fee or give a realistic estimate. In these cases you may:

  • give a forecast within possible ranges, explaining the factors that will affect the final cost, or
  • explain why the costs cannot be realistically estimated and provide the best information possible about the cost of the next stage of the matter

Clients have a right to complain about the bill. You should warn clients that you have a right to exercise a lien over their papers for unpaid costs at the start of the retainer.

4.3.2 Protection for client accounts

Funds held on behalf of clients could be affected in the event of the institution holding the client account collapsing. In this instance, the client may be eligible for compensation from the Financial Services Compensation Scheme (FSCS). The FSCS can pay compensation to consumers if a company is unable, or likely to be unable, to pay claims against it.

You may wish to explain the following to your client:

  • the name of the institution with which their money is held
  • that it is unlikely that you will be held liable for losses resulting from a banking failure
  • that in the event of the institution collapsing, you will seek consent from the client to disclose their details to the FSCS
  • the compensation limit for lost funds is £75,000.

Read our practice note on deposit protection for client accounts.

4.3.3 Contact details

As well as providing details of the person handling the matter, you may also find it useful to provide details of other members of staff who will be able to help with any queries. It can also be useful to provide information about when, and how, the person handling the matter can best be contacted.

You may wish to advise the client about opening hours and any out-of-hours service you provide.

4.3.4 Next steps

It is important to agree next steps with clients so they are clear what to expect. Where possible, you should include information about timescales for completing these next steps to manage the client's expectations and provide yourself with a timetable to help limit delay.
 

5 More information

5.1 Law Society

Lawyerline
Practice Advice Service
Training - regular programmes on client care and complaints management
Lexcel - our practice management standard, awarded only to practices meeting the highest management and client care standards
Law Management Section- join for support and training
Law Society publications - order from our bookshop
Practice Management Handbook
The Solicitor's Handbook 2015 (EPUB)
City Service for Law Firms

Law Society Consulting

If you require further support, Law Society Consulting can help. We offer expert and confidential support and guidance, including face-to-face consultancy on risk and compliance. Please contact us on 020 7316 5655, or email consulting@lawsociety.org.uk.

Find out more about our consultancy services

5.2 Other

Solicitors Regulation Authority's Professional Ethics Helpline for advice on conduct issues.

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