Part A – question (d)(7) – Transit Money – Section 140
Transit money means money received by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice.
Section 140 requires the law practice to pay or deliver the money, as required by the instructions relating to the money, within the period (if any) specified in the instructions. If the period is not specified, the money must be delivered as soon as practicable after receipt.
Record keeping requirements
For transit money received by the law practice, Section 140(2) requires the practice to record and keep brief particulars sufficient to identify the relevant transaction, and any purpose for which the money was received.
Where third party cheques are received, a law practice should ensure, where possible, that copies of the cheques are retained. Copies of other documentation received should also be retained. Examples include settlement directions from the vendor and directions from an incoming mortgagee, or directions to an agent. Together, these kinds of records will assist a law practice to discharge its obligation in respect of Section 140(2) ’to record and keep brief particulars sufficient to identify the relevant transaction and any purpose for which the money was received’. Transit money records should be kept in the client file.
Retention of Records
The brief particulars that must be retained for transit money (such as written directions, authorities or other documents) come within the definition of trust records in Section 128. In accordance with Section 140(3) these trust records are to be kept for a period of 7 years.
Transit Money Received in Cash
The law practice must deposit transit money received in cash into the general trust account as soon as practicable after receiving the money and before dealing with it in accordance with the instructions (Section 143). A trust receipt should be issued and the money dealt with according to the instructions as soon as practicable.