Undertakings often instil fear for some solicitors, and that’s not necessarily a bad thing. When used carefully and appropriately, they are a critical part of the conveyancing process – governing how and when deposit monies, documents and sale proceeds are to be dealt with.

But if used imprudently or recklessly, the implications can be serious. Earlier this year, for instance, the SRA fined a solicitor £7,946 (plus costs) for breaching a binding undertaking to hold the sale proceeds to order.

Where deposit monies are held to order, they are held in the purchaser’s solicitor’s client account and paid over on completion of the transaction.

James Ramdhun was instructed in October 2019 in the sale of a property alongside separate financial proceedings on divorce. In January 2020, the firm (Clapham Law LLP) gave an undertaking to the other party’s solicitors to hold the net proceeds of sale in its client account until the parties had agreed their respective shares, failing which it would be referred to court or arbitration for settlement.

The sale completed, but no agreement was reached and family proceedings continued. It then emerged that Ramdhun had been using (or authorising use of) the sale proceeds to pay legal costs and counsel’s fees between January 2020 and May 2022. He even loaned the client £39,000 via his private company at 8% interest.

He was found to have knowingly made the payments in breach of the undertaking, breaching Principles 2 and 5 of the SRA’s 2019 Principles and the Codes of Conduct.

Holding to order: a greater burden

Property lawyers have been on notice for some time now that a broader range of undertakings will become part of the conveyancing process. The conveyancing landscape is to undergo significant change.

Part of that change will be the introduction the draft protocol for exchange of contracts and holding to order, which covers – among many other matters –practical arrangements for handling deposits in the modern way of working.

The draft has a much wider scope than the Law Society’s existing formulae for exchange which is effectively out-of-date. It is far more common for deposits to be ‘held to order’, rather than paid over on exchange of contracts.

One purpose of the draft protocol is to clarify the status of the deposit when held to order, and electronic exchange.

The draft Protocol for Holding to Order 2024 will (as currently drafted) sets out the process for holding deposits on exchange; and will require conveyancers to provide a wider range of undertakings. In the context of holding a deposit to order, this would include:

Formal clarification of what ‘holding to order’ of deposits and documents means
The introduction of several undertakings for conveyancers. The specifics of the relevant undertaking, depending on the scenarios set out, are detailed in the draft protocol. (The undertakings set out will be subject to specific limitations on undertakings)

Two further protocols are also to be introduced - Immediate Exchange and Release of Contracts (to be applied where appropriate). The parties’ respective conveyancers will be required, for example, to agree specific matters before exchange or release of contracts, such as the method of signature and the procedure to be adopted for exchange

The protocol and related codes will also facilitate the use of modern technology in conveyancing.

What’s next?

The Law Society started consulting on the issues back in November 2023 and planned a further consultation this year. However, a Law Society spokesperson told TSG that the second round of consultation on the new draft of the Code will now take place in 2026.

They said: “This has been postponed due to several consultations already being underway this year - including the government consultations on home buying and selling reform and material information in property listings - which we will be seeking members views on.”

Undertaking and holding to order will be discussed in detail in our NEW Autumn Residential Property Event. See details to book here.