Escrow-accounts in Czech Republic. Basic information on the maintenance of attorney escrow accounts
Basic information on the maintenance of attorney escrow accounts
Where is the money kept?
Always in a separate account, in the lawyer`s name, called an escrow account. When choosing a banking institution, the lawyer must also consider any client requirements. A single account must only contain funds from one client. Thus, the client's assets are separated from the assets of the lawyer, and there is no risk of these assets being combined into an inheritance or other property in the event that the lawyer dies, goes bankrupt or if there is any threat of a case of judicial enforcement of the rights of the lawyer. The lawyer is obliged, at the client's request, to confirm the deposit of money on the escrow account.
What is а reward of the lawyer?
Payment of the lawyer for keeping money is always negotiable. The law does not regulate this issue. The fee is agreed to between the lawyer and the client.
How is an escrow account carried out?
The client enters into a written agreement on the deposit of funds or signs a trust management agreement with the lawyer, according to which, in addition to the custodian, third parties also have rights. The agreement stipulates the rights and obligations of participants, the possibility of calculating interest on the invested money, paying it in accordance with terms of the agreement, etc. Czech crowns or other foreign currency can be transferred to a lawyer either by depositing the funds with the cashier of the bank where the escrow account is established or by bank transfer.
Can a lawyer misappropriate money held in an escrow account?
Payments in the lawyer`s favour from the client's escrow account are not allowed, except in instances provided for by legal acts, a specific agreement with the client, a court order or instructions from other authorized departments. The lawyer is obliged to confirm the client's account balance at any time.
Can a lawyer keep shares, documents and other movable property?
Yes. The lawyer is obliged to keep them in a safe.
Who has access to the safe?
The safe can only be accessed by a lawyer or a person authorized by him. The contents of the safe can only be released to the client or a person authorized by the client.
Furthermore, it should be noted:
- Everyone has the right to freely choose a lawyer; this also applies to escrow accounts. No one can force a client to enter into an agreement with a predetermined lawyer when they are obtaining legal services (for example, when buying real estate through a real estate agency).
- The lawyer must keep records of all the client's funds in relation to the conduct of his/her escrow account, which must be provided to the client upon request. A record all operations involving client resources must be maintained. All documents (e.g. property management agreements, copies of documents, power of attorney or other documents created in connection with property management) are to be kept by a lawyer for 10 years from the end of the management of an escrow account.
- When concluding agreements on escrow accounts, the lawyer is obliged to indicate the custodian in accordance with § 2 para. d) Act No. 253/2008 Coll. on Combating Money Laundering and the Financing of Terrorism (hereinafter referred to as the Anti-Money Laundering Act). In relation to the role of keeper, he also has other obligations in terms of this law.
- The Czech Bar Association has created a so-called electronic book for recording funds for advocates, which is a continuously numbered register maintaining information about clients' funds with each lawyer. In this digital book, lawyers are required to report the existence of all escrow accounts, which allows the Bar Association to monitor the activities of lawyers and provides more strict control over the implementation of escrow accounts.