Does anyone know the legal situation about holding clients files until they have paid?
A client has advised that they no longer wish to use me but they owe me about 3 months payments. They say they will pay me but just incase they get funny can I hold onto their books until their cheque has cleared?
Whilst I also don't know the legalility of this I think this is an excellent way of helping to ensure clients pay on time, it is part of the procedure I use. Ultimately the clients are responsible for their records and should they be required to prove anything they will need all of their papers
Yes I would say so, and I did just that. Was owed some money and he always paid me late, so when I invoiced him for the last amount and told him that I was no longer going to do his books (its a long story but it was my decision to get rid of him), I held onto everything until the cheq had cleared, anyway eventually paid and he needed his stuff so waited for the cheque to clear and then phoned him and he collected his stuff, no problem at all.
If he is late paying just send a text and then put it in writing as well chasing your payment. I'm sure you will be OK, when the penny drops that they actually want there work back, some are abit slow off the mark to say the least.
This is called a legal right of Lien. (Definition of Lien is a passive right to retain (but not sell) property until the debt or other obligation is discharged).
there are certain files and documents that you have no right to hold onto such as a companies memorandum and articles of association.
Other things like bank statements and invoices are the property of the company, not the bookkeeper / accountant so these should be released upon demand.
You do have an absolute right to retain your working papers, files, company records, computer files. etc. These are the things that you would not release to another bookkeeper / accountant or the client until payment is received.
Hope that this helps.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
You also need to check what your governing body says. Certainly ACA and ACCA's cannot use non payment to hold onto papers required by a new accountant.
Note the line in there "ACCA supports the exercise of the right of Lien in certain circumstances".
Actually, that document gives all the details that one could ever need on this issue. Should have just pointed to that one in the first place.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
ah that's interesting, on a few occasions I have suggested to an ACCA that if they did not give me details I would have a word with their governing body and it has always resulted in a swift response!
Actually, just been having a read through the rest of the document (not just the Lien bit) myself and it does seem a bit of a legal minefield.
It's one of those cases where just because you can doesn't mean that you should as it could end up costing you more in non recoverable legal fee's than you lose in lost revenue.
I suspect the approach that most ACCA's will take is to hold onto the documents in the hope of payment but as soon as one plays devils advocate with them they have the sense to take the pragmatic approach.
So, general conclusion from me is that it's possible for some documents but probably not an approach to be advised to be taken lightly.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The ICB is OK with the Lien but everyone has to be careful , as you cannot withold certain documents, for example, documents sent by HMRC to an agent cannot be witheld in the event that the agent's client doesn't cough up.
