The government wants to claw back some of the interest earned by law firms on money held in client accounts.

It plans to pool this money into a central fund to support the justice system, including legal aid and court services.

But The Conveyancing Association says the interest is required by law firms to cover the costs of running client accounts.

During the house purchase process, conveyancers have to place the money from buyers and sellers into ring-fenced bank accounts so that it is properly protected and segregated from the law firm’s own assets.

This also ensures that it can be transferred from buyer to seller smoothly without risk of delay when the purchase completes.

Under the Ministry of Justice’s proposals, banks would continue to pay interest on client accounts, but law firms would be required to transfer a large proportion of this into a new Interest on Lawyers’ Client Accounts scheme.

For pooled client accounts, between 75% and 100% of interest could be taken, while around 50% would be removed from individual client accounts.

The Conveyancing Association has warned the proposals would have a direct impact on homebuyers and sellers, as firms operating on tight margins would be unable to absorb the loss of income.

Instead, it says costs would inevitably be passed on through higher conveyancing fees, with first-time buyers likely to be hardest hit.

The body also warns that many conveyancers are already struggling to open and maintain client accounts due to bank de-risking and stringent anti-money laundering checks.

It says the cumulative impact of regulation could prompt firms to exit the market, reducing capacity at a time when transaction volumes are high.

Conveyancing Association director of delivery Beth Rudolf says: “Client account interest is not a spare pot of money that can be simply taken away from firms without consequences.

“For conveyancing firms, it plays a real role in funding the systems, controls and checks that protect consumers and allow transactions to proceed safely.

“Removing it does not make those costs disappear. It simply shifts them elsewhere, meaning higher fees for buyers and sellers and additional pressure on firms already operating in a stretched market.

“This consultation feels rushed and disconnected from how conveyancing actually works.

“Any reform needs to be based on proper evidence and meaningful engagement with the sector, otherwise the impact on consumers and the housing market will be significant.”