All of the major Irish banks now impose negative interest rates on solicitor client accounts. This is despite the Law Society's significant lobbying efforts to exempt solicitor client accounts from such interest.
The European Central Bank have welcomed negative interest as a way to encourage economic activity in the context of the impact of the pandemic on the European economy. The negative interest rates vary across the Irish Banks from -0.5% to -0.9%. Additionally the trigger points vary across the banks from €1 million to €3 million. Currently, the negative interst rate applied to our firm's client account is -0.5%.
The banks' thresholds may have been established with the intention of only impacting high net worth individuals and corporate clients. However, by imposing the charge on solicitor client accounts, they will now affect a large number of ordinary customers.
Impact of negative interest on property transactions and administration of estates
Solicitor's clients will essentially now face a double charge in conveyancing transactions and will have to pay more money to meet the contract price. The Law Society has highlighted the injustice of these new charges and their impact of home buyers. However, the Banks insist that the application of negative interest rates are a reflection of the cost incurred in holding the funds on behalf of the customer.
The expectation is that it will now become common for vendor's solicitors in conveyancing transactions to insert a condition in the contract stating that if the amount of any deposit being held by the Vendor's Solicitor is reduced as a result of the application of negative interest, then the vendor shall be entitled to call on the purchaser to make up the deficit. It may also become more common and necessary for solicitors holding their client's money for any extended period of time, to pass the negative interest charge on to the client.
It is expected that Irish Banks will eventually extend negative interests to all consumer accounts, possibly with the exception of small deposits.