Escrow-accounts in the 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's requirements. A single account must contain only 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 included into an inheritance or other property in the event that the lawyer dies, becomes insolvent or if there is any threat of an enforcement of the rights and obligations 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 the money is always negotiable. The law does not regulate this issue. The reward is agreed between the lawyer and the client.

How is an escrow 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 its 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 the lawyer misappropriate the money held in an escrow account?

Payments in the lawyer's favour from the client's escrow account are not allowed, except as provided by law, agreement with the client, order or instructions of the court or public authorities. 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 — deposit.

Who has access to the safe — deposit?

The safe — deposit can only be accessed by a lawyer or a person authorized by him. The contents of the safe — deposit can only be released to the client or a person authorized by the client.

Furthermore, it should be noted:

1. Everyone has a 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).
2. 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 of 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) shall be kept by a lawyer for 10 years from the end of the management of an escrow account.
3. 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. In relation to the role of the keeper, he also has other obligations in terms of this law.
4. The Czech Bar Association has created a so-called electronic book to record the funds for attorneys, which is a continuously numbered register maintaining information about the client's funds with each lawyer. In this digital book, lawyers are required to report the existence of all escrow accounts, which allows the Czech Bar Association to monitor the activities of lawyers and provides more strict control over the implementation of escrow accounts.