Are you buying a property? Then, you will likely be asked to provide proof of funds and the source of those funds. This step raises questions, misunderstandings, and frustration. So let’s clarify: this isn’t red tape for its own sake. It’s a legal requirement, and it exists to protect everyone involved.
At Rachel Watts Law, we are committed to ensuring that the conveyancing process is as smooth as possible. This requires a high level of transparency and collaboration from the outset, particularly regarding your finances. This transparency is key to building trust and confidence in the process.
What Do We Mean by “Proof of Funds”?
In plain English, it is proof that you possess the funds to purchase the property. That might include:
- Bank statements
- Savings account summaries
- Evidence of gifted deposits
- Loan agreements
And that is just the beginning. Depending on your situation, we may require multiple documents.
Then, What Is the “Source of Funds”? Isn’t That the Same?
Not quite. While proof of funds demonstrates that you have the money, the source of funds clarifies where that money originated.
This is where many people get stuck. “It’s in my account, so why does it matter?” Because the law says it does. Solicitors are subject to anti-money laundering (AML) regulations. This means we are legally obliged to understand how your money was obtained and whether it was earned, gifted, inherited, invested, or acquired in some other way.
So Why Does This Matter to You?
You’re probably not involved in money laundering, and we understand that. However, the rules are designed to prevent financial crime and ensure that property is not being used to launder illicit funds.
If we fail to comply with these regulations, both you and we could face criminal penalties. This is not a risk we are willing to take, for both your sake and ours. It’s essential to understand that failing to provide the necessary documentation can result in serious legal consequences, which is why we emphasise the importance of this process.
Where the System Often Falls Down
Some clients upload documents through platforms like InfoTrack or other third-party systems, assuming that is the end of the matter. However, the issue is that not every document reveals the complete story.
For example:
- A bank statement shows £50,000 but doesn’t tell us where it came from.
- A lump sum appears with no explanation. Was it a gift? A loan? An investment?
- A document is uploaded, but it’s outdated, incomplete, or redacted.
We then need to follow up, clarify, and verify the information. This results in a delay for you.
What You Can Do to Help Things Run Smoothly
It’s straightforward: when in doubt, over-communicate. This means providing all relevant documents, being transparent and detailed in your explanations, and promptly responding to any follow-up questions or requests for additional information. The more information you can provide upfront, the smoother the process will be.
- Let us know in advance how you plan to fund the purchase.
- Be clear on gifts. We need a letter and the donor’s ID.
- If you’re using investments, we require the statement, along with the withdrawal confirmation.
- If your funds are coming from multiple sources, please let us know all of them.
This Isn’t About Being Difficult
We’re not here to judge how you acquired your money. We’re here to help you use it safely and legally to purchase a home. The sooner we comprehend the complete picture, the sooner we can finalise the deal.
We take pride in cutting through legal jargon to provide you with clear, practical advice. This is one area where a little upfront effort can save a significant amount of time and effort later.
If you’re looking for a property solicitor who comprehends both the legal requirements and knows how to navigate you through them with care and clarity, please get in touch.
We don’t just process transactions. We work with people.