What financial information will your property lawyer need — and why?

Buying a property is usually the biggest purchase someone will ever make. As such it can be an exciting time; looking forward to your new home. However, it also involves a fair amount of paperwork, some of which applies to the property itself, while some of it is about you and in particular about the money being used to fund the purchase.

Under current anti-money laundering regulations, your property lawyer will need to ask questions about where your purchase money is coming from. This is not because they are being difficult, or because they do not trust you, it’s because lawyers are required to follow strict anti-money laundering rules and must be able to satisfy themselves that the funds being used in a property transaction have a legitimate origin.

It is not just about having the money

One of the most common misunderstandings is that showing a bank balance will be enough.

Your lawyer will need to see more than evidence that the money is currently sitting in an account, referred to as ‘Source of Funds’. They will need to understand how it got there, known as ‘Source of Wealth’. A bank statement showing a balance of £50,000, for example, may confirm that the funds exist but it does not explain whether that money came from salary, savings, a gift, an inheritance, a previous sale, a business transaction, or somewhere else entirely.

Where it came from matters.

What your lawyer is trying to establish

The aim is to demonstrate that the property is not being bought using the proceeds of crime in any way.

Property transactions can involve large sums of money, sometimes moving quickly and between different accounts. For that reason, property purchases are treated as an area where money laundering risks have to be taken seriously. Lawyers are required to carry out checks, ask questions, and keep appropriate records so that they can show they have taken reasonable steps to understand the Source of Funds and Source of Wealth, failure to do so, even when the monies are legitimate, can lead to sanctions, fines and in some cases criminal proceedings and imprisonment.

Put simply, your lawyer needs to be able to answer two questions: where is the purchase money now and where did it originally come from?

If the money came from savings

If your deposit has built up over time from regular earnings, your lawyer may ask to see bank statements showing the pattern of saving. They may also ask for payslips, employment details, or other evidence that helps connect the savings to your income.

This does not usually mean accounting for every pound you have ever earned. It does mean providing enough information to show a clear and credible route from your earnings to the money being used for the purchase.

If the money was inherited

Where funds have come from an inheritance, your lawyer will need to know when the inheritance was received and from whom. They may ask for documents connected with the estate, such as a letter from the executors, estate accounts, a grant of probate, or bank statements showing the money being paid to you.

The important point is that the inheritance should be traceable. If the money has moved between accounts since it was received, you may be asked to provide statements showing that movement.

If the money came from a sale

You may be using money from a previous property sale, even if that sale is not directly connected with the purchase you are now making. In that case, your lawyer may need to see the completion statement from the earlier sale, together with bank statements showing receipt of the sale proceeds.

The same principle can apply where funds have come from the sale of a business, shares, investments, or another asset. Your lawyer will need to understand what was sold, when it was sold, and how the proceeds reached the account from which the purchase money will be paid.

If someone else is helping

Many buyers receive help from family members, particularly with a deposit. If this applies to you, your lawyer is likely to need information about the person providing the money as well as evidence of where their funds came from.

This can sometimes come as a surprise. However, if part of the purchase price is being provided by a parent, relative, or friend, the same anti-money laundering requirements still apply. Your lawyer cannot simply accept the money without understanding its source.

Why early preparation helps

Source of funds checks can take time, especially where money has come from several different places or has been moved between accounts. The sooner you start gathering evidence, the easier it is to avoid delays later in the transaction.

It is sensible to keep copies of bank statements, sale statements, inheritance paperwork, payslips, savings records, and any other documents that explain the funds you intend to use. If you are unsure what will be needed, ask your lawyer at an early stage.

Clear evidence at the outset can make the process smoother for everyone.

A practical part of the conveyancing process

Being asked for financial information can feel intrusive, particularly when you are already busy arranging surveys, mortgage offers, removals and completion dates. However, these checks are a routine and essential part of modern conveyancing.

Your property lawyer’s role is not only to help you buy the property but also to make sure the transaction is handled properly and in accordance with the rules that apply to solicitors and conveyancers. Providing full and prompt information about your finances helps them do that.

In short: it is not enough to show that the money is available. You also need to be able to show where it came from. Doing so early in the transaction can prevent frustration and delays.

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This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances. Fraser Dawbarns LLP is always happy to provide such advice.